Fairness in Foreclosure Act of 2011

April 20, 2012 at 2:27 pm

A deficiency judgment is issued when a house has been auctioned off, but did not sell for enough to pay off the total amount owed to the lender. Many homeowners fear the bank will sue them and go after their wages, assets, and retirement accounts—threatening any financial security that they may have remaining.

Many states have made deficiency judgments impossible for lenders to pursue.  In December of 2011, a bill was introduced in the U.S. House of Representatives that would extend limitations on deficiency judgments to all states. Called the Fairness in Foreclosure Act, it would “ensure uniformity and fairness in deficiency judgments arising from foreclosures on mortgage for single family homes.” It would stipulate that a deficiency judgment can only be pursued within one year of the foreclosure of the home, except in states that currently have shorter time limits in place. In addition, the bill proposes that lenders not be allowed to go after low-income borrowers for deficiency judgment.

Defaulted borrowers are already behind thousands of dollars on their mortgage payments and facing public auction of their houses. With a deficiency judgment, the ordeal may continue indefinitely. For these homeowners living in fear of receiving a deficiency judgment after a short-sale or foreclosure, the Fairness in Foreclosure Act of 2011 would provide some safeguards.

Sonia Jones, Housing Resource Director

Entry filed under: Uncategorized.

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