There is an Associated Press story that has been running around the country on mortgage walkaways and state anti-deficiency laws. Here is the long version of the story. The story accurately quotes me but then provides a list of states that the reporter on the story claims are the "full list" of states that have anti-deficiency laws and the positioning of the list in the story makes it look like the reporter got the list from me. He did not. And based on my understanding, the list provided is highly inaccurate.
I've received several emails from people around the country asking about this list, and in particular, the inclusion of Florida on the list. Let me emphasize--the reporter did not get that list from me and based on my knowledge the list that is provided is incorrect. Based on my understanding, there are multiple errors both of inclusion and omission on the list. Please do not rely on the list provided in the story and if you have any questions you should check with a real estate specialist in the state in which the property is located (this would seem to be obvious, but I had one lawyer contact me who said she had been rebuked by a client who was upset and said that the lawyer was "obviously incompetent" because she didn't even know what was in the newspaper).
And please don't attribute this list to me--it isn't mine.
"Shackle doesn't fit that category. The single, first-time homebuyer bought a two-bedroom condo in Calimesa, Calif., in 2006 for $191,000. She wasn't required to put any money down despite her limited income as a waitress, thanks to a lofty credit score of 788."
I think I see the problem.
Hahahaha, welcome to every other day of my law practice. I can never stop being amazed at what clients will come up with to be unhappy about. Nothing gets my goat worse than being accused of bad lawyering based on some crazy misinformed idea- and usually there is no use trying to convince the client that they are wrong. At some point, all you can do is laugh.
Still, I agree that it's an incorrect list nonetheless.
From what I can tell, the article gets sliced and diced and reprinted in various forms around the country, so sometimes the location of the quotes and list gets moved around. And for the reasons you state it seemed obvious to me that the list didn't come from me, but I've gotten enough emails that apparently a few people drew that inference.
When commercial real estate deals go upside down in my state (which allows deficiency judgments), the parties typically do a workout deal that involves the borrower surrendering the property. The borrower and guarantors then submit to debtor's exams, and unless they have significant assets elsewhere, are released from their deficiency liability (or, at most, have to make a relatively small settlement payment). The reason the banks cut these deals is simple: the bank wants the bad loan off its books ASAP, wants the property sold ASAP, and doesn't want to pay me $50,000 to fight frivolous defenses or counterclaims.
In the past year, I've done a few deals (I represent banks) opposite borrowers who live in anti-deficiency states but who are real estate speculators/investors who bought property in my state and lent money from in-state banks to do so. Universally, these borrowers are much more difficult to deal with. They refuse to negotiate, fight you every step of the way, and do everything possible to drag out the process. Sometimes they do it so they can continue to collect the rent (which is pledged as collateral to the bank), other times it's just to be spiteful.
Either way, the basic attitude is: "I'm keeping the property, I'm not paying for it, and go to hell!" As a lawyer who bills by the hour, I don't mind fighting off frivolous defenses and counterclaims, nor do I mind domesticating a huge deficiency to the deadbeats' home state and chasing them into bankruptcy. But I guess my experience just makes me wonder if anti-deficiency laws create undesirable perverse incentives on the part of borrowers...
As for Patrick... for every scamming house-flipper there is also someone who just needs out from under, and after their lender refuses to talk and/or (wrongly) threatens then with "domesticating a huge deficiency to the deadbeats' home state and chasing them into bankruptcy" they might feel pretty good about sticking them with it.
In short, a lot depends on where the loan was made, how the loan was made, who now owns the loan, how aggressive the servicer is in collecting the loan, etc. Anyone getting advice from a newspaper is an idiot.
There was a story on NPR a month or two ago about how journalism schools don't teach business reporting classes anymore. I wonder if they teach legal reporting classes, or if they do, who is teaching them.
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