Question:
Does the FHA pursue deficiency judgments against foreclosed homeowners in California?
Answer:
The simple answer is no: the Federal Housing Administration (FHA) does not pursue deficiency judgments against foreclosed homeowners. However, the FHA does have the right to pursue a homeowner for the unpaid balance remaining on a foreclosed home.
Homeowners under programs insured by the FHA or the U.S. Department of Veterans Affairs (VA) do not receive California anti-deficiency protection for losses sustained by these federal agencies. The federal statutory right to collect losses on FHA-insured mortgages preempts state law to the contrary. [Carter v. Derwinski (9th Cir. 1993) 987 F2d 611; See Realtipedia Volume: Buying Homes in Foreclosure Chapter 15: FHA and VA loan assumptions]
The Department of Housing and Urban Development (HUD), which administers FHA, may require lenders to pursue deficiency judgments. HUD states their intention is to prevent mortgagor abuse, specifically by focusing on:
- non-owner-occupant homeowners;
- those who have previously defaulted on one or more FHA-insured mortgages; or
- homeowners who have chosen to strategically default. [HUD Mortgagee Letter 89-14]
All this being said, the FHA has not exercised its right to collect on a deficiency in California in over 20 years.
SnS is wrong. Banks are not [and in most cases cannot] pursuing deficiency judgments, which requires that foreclosure be done judicially. Thus, after a trustee sale, which is how virtually all CA residential foreclosures occur, deficiency judgments are barred by law [CCP 580d].
As far as abusers, Congressional investigation showed that the real abusers were the banks, investment banks, CDS issuers, and the ratings agencies. Borrowers, mortgage insurance companies, and mortgage investors were largely victims of an elaborate scam.
FHA is federally insured, so they are protected as the banks are and the banks are pursuing Deficiency judgements on foreclosed homeowners. I believe FHA should exercise their rights to pursue those mortgage abusers. This does affect us homeowners making our monthly payments with increased fees & the costs of homeownership.
Interesting SnS how the only concern you have is for yourself. And selfish motives is a large part of what’s wrong in America. Since when is every foreclosure the result of a “mortgage abuser?” Never heard this terminology before. I was a HUD counselor for 15 years. The overwhelming majority of the people I saw were in trouble with their loans for valid, understandable reasons. I don’t ever recall seeing a “mortgage abuser.” FYI, every time our economy goes through a downturn, some people will suffer. Lastly, NOTHING about some random delinquent homeowner will have ANY affect on your mortgage. Your mortgage terms are set.