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Monday, November 3, 2014  
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Orlando REALTOR® | November/December 2014

The Florida Fair Foreclosure Act limits deficiency claim filing from five years to one year

By Robert Borr, Esq.

Deficiency claims arise when the sale proceeds from a property auctioned through foreclosure are insufficient to cover the amount that was still owed on the mortgage. Claims can also stem from the short sale and deed in lieu processes. Many homeowners do not realize that there may be a personal obligation to pay these funds, which can equal a substantial amount.

It had become a common trend for debt collection companies, who purchase the right to these claims, to wait as long as possible before filing to obtain the judgment in hopes that the borrower would be back on their feet and have acquired assets to settle rather than face litigation. Many unsuspecting borrowers had long forgotten their foreclosure when they were served with a deficiency lawsuit seeking thousands of dollars years after their homes were lost.

The Florida Fair Foreclosure Act was signed into law on June 7, 2013. This law limits the window to file a deficiency claim from five years to one year, and older potential claims had to be filed by July 1, 2014.

The statutory language expressly states that the one-year limitation is related to a note secured by a mortgage against a residential property. The statute makes it clear that deficiency claims though a deed in lieu of foreclosure fall under the purview of the one-year time window. Although not in black and white, short sales should also fall under this law. But what does not fall into the statute?

Home equity lines can be a part of a short sale, deed in lieu, or standard foreclosure. Because home equity lines are typically not connected to an express mortgage, it would fall outside of the scope of this statute, and filing within one year is not required. The legislature has done well to curtail the aftermath of foreclosure, but with the myriad of financial instruments that became popular during the real estate boom, a few of them escaped the corral.

Robert Borr is an attorney with Nishad Khan P.L.

Central Florida Real Estate Attorneys Council provides this column on real estate law issues as a service to ORRA members to provide a general understanding of the law on various topic interest, not as a substitute for individual legal advice or consultation, and should not be relied on in specific situations without consulting with a real estate attorney. For more information, please visit

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