| So far in the foreclosure crisis and resulting meltdown | | | | to be filed until after the Motion to Dismiss has been |
| of the financial markets, there does not seem to have | | | | ruled upon), homeowners can claim the bank has |
| been an increase in the number of banks seeking out | | | | suffered no losses because of its bailout by the |
| deficiency judgments against homeowners. On the | | | | government. To sue for foreclosure, the bank must |
| contrary, the market has really only seen increases in | | | | suffer a loss on the contract -- it can not transfer the |
| the number of banks attempting to unload their bad | | | | note to the government and still sue for recovery of |
| mortgages onto the government. | | | | damages. |
| As a result, it may be easier to get a loan modification | | | | This defense may not have been used yet, and how |
| through the government, if the loans are eventually | | | | far it will get homeowner is debatable, but the longer |
| taken over (like with Bear Stearns or AIG mortgages). | | | | borrowers can drag out the lawsuit, the better chance |
| But banks have not increased their activity in pursuing | | | | they might have to force the bank to negotiate a loan |
| foreclosure victims for deficiency judgments. | | | | modification, deed in lieu, or other solution. |
| If homeowners are planning on using the "produce the | | | | If nothing else, homeowners can probably hire an |
| note" defense to avoid a deficiency judgment, though, | | | | attorney for a few thousand dollars and get an extra |
| they should do that in their defense to the bank's | | | | 6-12 months to live in the foreclosed house |
| foreclosure lawsuit. Immediately upon being served | | | | mortgage-free. By then, the bank may be willing to |
| with the paperwork, they can file a Motion for | | | | negotiate a deed in lieu just to get control of the |
| Extension of Time to request an additional 30 days or | | | | property and move the owner out of the house. |
| so from the court to put together their answer. Then, | | | | In those negotiations, borrowers can specifically |
| based on the contents of the complaint and the bank's | | | | demand that the bank give up any right to sue them |
| actions up to that point, borrowers can file a Motion to | | | | again for a deficiency judgment or any other |
| Dismiss based on the bank not providing the original | | | | damages. Although the deficiency may not be a |
| note. | | | | problem, this route may give homeowners the peace |
| In their answer to the complaint (which would not have | | | | of mind they are looking for. |