What is a Deficiency Judgment?
Video Summary
What is a deficiency judgment? A deficiency judgment is the amount of the money judgment that a lender can obtain whenever they foreclose on the property and after the foreclosure sale.
The amount of the deficiency judgment is the difference between the amount that is owed to the lender at the time of the final judgment, less the market value of the property on the date of the foreclosure sale. Many people are very concerned about deficiency judgments, but my experience has been that most lenders at this point are not pursuing deficiency judgments after they foreclose on the property.
Many people are very concerned about whether or not a lender can take any of their bank accounts or has a judgment against them when they file a foreclosure action. Not only does the lender not have a right to any of your money, they don’t have a judgment against you for a money judgment that can be collected against any of your assets, even after the mortgage foreclosure or the foreclosure sale.
In order to establish this judgment, the lender has to go through a supplemental proceeding (or a deficiency judgment proceeding) in order to establish the amount of the deficiency judgment. This is somewhat technical and therefore many of the lenders (from my discussions with this legal community in West Pasco) have not pursued these deficiency judgments.
So, until such time as the lender establishes deficiency judgment, you do not owe the lender any money, or it has not been reduced to a judgment amount to determine the amount of it. Also, if you go through a foreclosure, you won’t get a 1099 because the amount has not been established.
If you have any other questions about deficiency judgments, give me a call at (727) 847-2288. Thank you.
- Published in Real Estate - Foreclosure, Videos
What is a Ladybird Deed?
Video Summary
What is a ‘Ladybird deed?’ A ‘Ladybird deed’ is a conveyance by an owner of real property, wherein they convey the property usually to a relative or a friend and they reserve to themselves a life estate. In addition to a life estate, they also reserve additional powers and rights to the property, such as the ability to sell or transfer the property during their lifetime and to retain all the proceeds.
The reason why most people execute these deeds is to avoid probate. With this deed, if they have their accounts as ‘payable on death’, there’s no probate involved. If they have a brokerage account as ‘transfer on death’, where they have their real estate and don’t want to lose the benefits of their homestead exemption if in joint names (because of certain ramifications). They also aren’t disqualified for Medicaid with a Ladybird deed; your homestead is not counted if you happen to have Medicaid.
The deed was developed by an elder law lawyer who set it up for the very purpose to avoid probate (which we use quite often), and also not disqualify the parties from obtaining Medicaid (as it being a conveyance of a gift). You can use it on any real property that you like.
Some people say, “How did it get the name ‘Ladybird?’” Well, the author (or the person who came up with this and published it in his elder law manual) named various deeds after famous persons. And this deed’s named after Ladybird Johnson, and so therefore, the name ‘Ladybird’.
So it’s a Ladybird deed which is your ability to transfer the property after you pass away to a loved one (or whoever you’d like, for that matter) but retain all the rights of ownership during your lifetime as to not have it disqualify you from Medicaid; and/or to retain all of your rights, as far as homestead exemption is concerned. So it’s a nice estate-planning tool if you have a simple estate.
If you’d like to have a Ladybird deed prepared or discuss it, give me a call at (727) 847-2288. Thank you.
- Published in Real Estate, Videos
Who Can Foreclose on a Piggyback Mortgage?
Video Summary
Who can foreclose a piggyback mortgage? Well, first let’s talk about a piggyback mortgage. Piggyback mortgages were used to avoid having to obtain mortgage insurance whenever you acquired a home. The purchaser would borrow 80 percent loan to value for a first mortgage, which would not require any mortgage insurance.
They would then see about getting a second mortgage, which was a home equity loan (for either 10, 15, or whatever amount they could obtain over and above the 80 percent) so they would have a very small down payment. Home equity loans do not require mortgage insurance, so they would avoid the mortgage insurance premium that would have to be paid if they obtained, let’s say, a 95 percent loan to value.
So the question then becomes, “Well, who can foreclose?” If you don’t make the payments under the first mortgage, they have the ability to foreclose and take the property away from you. If you don’t make the payments on the second mortgage, well, they can foreclose also. In this day and time, though, value of property has decreased so much that there’s usually no, or very little equity in the property – so the second mortgage is basically unsecured.
The second mortgage holder (if you didn’t pay them) can sue the borrower on the promissory note and probably just avoid the foreclosure process. The first mortgage holder could foreclose its first mortgage and include the second mortgage holder in the foreclosure action and wipe out any lien that the second mortgage holder would have.
Sometimes this is a little bit problematic when the first mortgage holder and the second mortgage holder are the same lending institution. In this case, the question becomes, “Can they sue themselves?” Many times they don’t, which then raises another question in the event of a foreclosure where the second mortgage is not included – whether or not you’ll have a problem if you buy the home at a foreclosure sale and be required to pay the second mortgage holder.
So an answer to the question “Who can foreclose a piggyback mortgage?” – either party can, if you default under either mortgage.
If you have any questions about foreclosures (whether it be piggyback or otherwise), give me a call at (727) 847-2288. Thank you.
- Published in Real Estate - Foreclosure, Videos
What Is A Life Estate?
Video Summary
“What is a life estate?” Usually, it has to do with real property, or when the time period in which you own something is measured by a life. So, therefore, it’s for an indefinite period of time. We usually encounter life estates when you’re dealing with real property, particularly with a homestead. (Under our Florida constitution, homestead means where you reside.) If you die married, then a life estate passes to your spouse with the remainder interest passing to your children.
So, the life estate is measured by the life of the widow, and she gets to use the property during her lifetime. And then, upon her death, the decedents’ children receive the remainder interest, and they’re called remainder men and she’s called a life tenant, and so that is whenever you usually encounter a life estate. The homestead statute has recently changed and now the widow does have an election to take a half-interest instead of a life estate. That is one of the areas where life estates are created– through our Florida constitutional homestead – when the decedent dies, survived by a spouse and children.
The other time that you see a lot of life-estate deeds is in estate planning or elder law planning. When a person owns real property and they want to see that it passes to any particular individual, (as long as they’re not married) they can deed the property to an individual and reserve a life estate. And that has been expanded upon by what we call Lady Bird Deeds or enhanced life-estate deeds, and this came about as a result of an elder law lawyer preparing these deeds so that they would not disqualify his clients from obtaining Medicaid. So, if you have a regular life-estate deed, it’s a completed gift of you convey the remainder interest.
A Lady Bird Deed, however, says that not only does the life tenant reserve the right to use the property during their lifetime, they also reserve the right to sell the property, transfer the property to anyone they would like and they don’t have to account for the remainder men for any monies that they receive from the sale of it, or if they mortgage the property. The origin of the word “Lady Bird” comes from the author naming the various deeds he had in his publication after famous persons. The Lady Bird Deed is named after Lady Bird Johnson. So, that dates how long it’s been around and the author of the Lady Bird Deed, or the enhanced life-estate deed.
So, a life estate is measured by the life of a particular person and is usually created by someone conveying property to their children and reserving a life estate, or through our constitutional homestead, where the surviving widow receives a life estate and then the balance or the remainder goes to the decedent’s children. So, if you have any other questions or would like a Lady Bird Deed or to do some estate planning to avoid probate, give me a call at 727-847-2288. Thank you.
- Published in Real Estate, Videos