Question 1

What is a recourse mortgage in Florida?

Accepted Answer

A recourse mortgage allows the lender to pursue the borrower’s personal assets if the property’s foreclosure sale price does not cover the outstanding loan balance. In Florida: most residential mortgages are recourse loans (the lender can seek a deficiency judgment for the difference between the loan balance and the foreclosure sale price). Deficiency judgment: Section 702.06 allows the lender to file for a deficiency judgment within 1 year after the foreclosure sale.

Question 2

How does a deficiency judgment work in Florida?

Accepted Answer

Deficiency process: after the foreclosure sale, the lender files a motion for deficiency judgment (within 1 year; Section 702.06), the court determines: the fair market value of the property at the time of the foreclosure sale, and the deficiency amount (the difference between the loan balance and the fair market value; NOT the foreclosure sale price). The borrower can: challenge the fair market value determination, negotiate a settlement, or file for bankruptcy to discharge the deficiency. The deficiency judgment: is enforceable for 20 years (Section 55.081) and accrues interest.

Question 3

Can a borrower negotiate to avoid a deficiency judgment in Florida?

Accepted Answer

Negotiation: options include: short sale (the lender agrees to accept less than the loan balance; the lender may waive the deficiency in the short sale agreement), deed in lieu (the borrower transfers the property to the lender; the lender may waive the deficiency), cash for keys (the lender pays the borrower to vacate and waives the deficiency), and settlement (the borrower negotiates a reduced deficiency payment). Important: get any deficiency waiver in writing. Tax implications: forgiven debt may be taxable income (IRS Form 1099-C).

Recourse Mortgage

Recourse Mortgages in Florida

Deficiency Judgment

Avoidance Options

Tax Implications

Related Terms

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