The housing market in Ohio has recovered, but only somewhat. In Ohio the market has largely remained steady since 2011. While not ideal, it is surely better than the housing bust of the mid to late 2000s. Ohio was among the nation’s hardest hit during the foreclosure crisis.
During those bust years, thousands of Ohio homeowners defaulted on loans they could not afford. Homeowners felt that walking away from a mortgage may have been their best option, as the knock against credit score and future purchasing power did not outweigh the money they could save by avoiding paying on the mortgage.
While lenders then foreclosed on the homes, the fees, length of time and resale value meant that banks suffered a huge loss in aggregate. In all, the Great Recession left home lenders with more than $1 trillion in foreclosed loans.
That has made unique options attractive to some lenders, including deficiency judgments. These judgments can be used to garnish wages, freeze assets and perform other collection actions. A deficiency judgment on a foreclosure is a court order making the debtor personally liable for the outstanding debt of a home mortgage.
A lender can also initiate action against a debtor in a short sale or deed in lieu of foreclosure.
Deficiency judgments in Ohio
Individual state law governs deficiency actions. In Ohio, deficiency actions post-foreclosure are allowed, but that action is void two years after the confirmation of the sale of the home. For a short sale, a bank has up to 15 years after the property is sold to initiate a deficiency judgment.
For banks, there is certainly a cost-benefit analysis that must be done before initiating a deficiency judgment. This can include whether there is any money to collect, the negative publicity of initiating deficiency judgments, and the costs associated with bringing the action. Still, for lenders who have yet to fully recover from the housing bust, obtaining a deficiency judgment has become a more popular option. Part of that increase may be because some lenders have sold their debt to collection agencies, who may be more likely to attempt to collect through a deficiency judgment than banks and lenders.
In addition, many banks and collection agencies are focusing their actions on homeowners who likely could have continued to pay their mortgage, but chose not to do so.
A creditor’s rights attorney can help
Whether a deficiency judgment is the best option to pursue often depends on the circumstances of the foreclosure. In other cases, loan workouts or other alternatives are preferable. Lenders and landlords concerned about foreclosure, outstanding debt post-foreclosure or other creditor issues should contact the experienced law firm of Delev & Associates.