Top 10 Halloween Safety Tips
Trick-or-treating can be one of the most fun Halloween events for your kids. However, it can also be potentially dangerous because it happens outside in the dark. Here are some Halloween safety tips to make sure your kids come home safe and happy:
1.Never go into a stranger’s house – Only get candy from houses that give it to you at the door. If someone invites them in, tell them to just say “no, thanks” and leave immediately.
2.Use the buddy system – Kids should never go trick or treating without a sibling, friend, or parent. If they are going out without parents, make sure you know the area where they will be trick-or-treating.
3.Set a curfew – If you aren’t going trick or treating with your kids, set a time that they need to be home by or a time for them to check in with a phone call. That way, you know that they are safe.
4.Eat a snack / dinner before trick or treating – By eating something beforehand, your kids won’t be as tempted to eat their treats before they come home…which leads to the next tip…
5.Always cross streets at interections and walkways – Make sure your child knows how to cross a street and to only cross at designated intersections.
6.Always check candy before giving it to your child – Make sure none of the candy is open or looks like it was tampered with. If you have small children, make sure the candy is not a choking hazard.
7.Steer Clear of Vacant or Poorly Lit Homes.
8.Wear something reflective in your costume and carry a flashlight – It’s going to be dark out by the time you go home, so make sure cars can see you at night. Put reflective tape on the costume and trick or treating bags.
9.Create well fitting costumes – Kids will be running from house to house, so make sure their costume is suitable for running. Make sure face marks still allow your child to see their full range, make sure capes are not too long to trip over, and ensure any swords are not too sharp. Have them wear gym shoes.
10.Choose flame resistant materials for costumes – Since there can be candles and other open flames at houses, choose a fire resistant material for costumes to avoid burn injuries.
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Monday, October 31, 2011
Monday, October 3, 2011
To fix the economy, first fix the housing market
There's no way the U.S. can get back on track without a cure for what's killing real estate.
By John Cassidy, contributor
FORTUNE -- Is this a great country or what? At the start of last year, a friend of mine, the proprietor of a small business that has suffered badly in the recession, entered a trial mortgage-modification program. A few months later the bank told him that his application for a government-assisted refinancing rate had been turned down -- his house was too far underwater. He had bought it during the boom for $220,000, putting down $30,000, and then spent another $45,000 doing it up. Now it's worth about $100,000. Once his monthly payments were set to go back up (his mortgage rate is 6.5%), my friend stopped paying them and waited for the foreclosure and eviction notices to arrive. A year and a half later he is still inhabiting his own home and watching the mail.
Whenever I hear somebody saying that growth is about to pick up, I think about my friend and the roughly 11 million homeowners whose mortgages are worth more than their homes. Some of them are still making their monthly payments. Some, like my pal, are living for nothing. The drip-drip foreclosure crisis shows how, six years after the bursting of the real estate bubble, the U.S. residential real estate market is still a mess. And without a genuine revival in housing, it is hard to think we will ever get a self- sustaining recovery.
Sure, the news that President Obama and the Republicans are talking about enlarging this year's payroll tax cut and extending unemployment benefits through 2012 is good news. The last thing the economy needs is a $250 billion hit to spending, which is what doing nothing would amount to. But where are the serious proposals to revive the housing market? It's as if both parties have agreed to drop the issue.
Housing isn't just another industry: It's a driving force for the entire economy. Residential investment accounts for up to a quarter of overall capital investment. House prices have a big influence on consumer spending -- for every $1,000 the value of his house falls, a homeowner tends to cut his outlays by about $50 or $60. And falling property tax revenues are decimating many towns and cities. How bad is it out there? New-home construction is running at less than a third of its pre-recession level; in August it fell again. Existing-home sales picked up a bit, but that was largely because of bottom-fishing investors who are betting prices can't go any lower. Let's hope they are right. Nationwide, according to the S&P/Case-Shiller index, prices are down 6% over the past year and down 32% since the first quarter of 2006.
I'm not saying that fixing the housing market is easy. If it were, somebody would have done it. But to begin with, we could make the much-maligned Home Affordable Refinancing Program (HAMP) work better. Generally, anybody who is current on payments and whose home is worth at least 80% of the outstanding loan is eligible to participate. But many homeowners have been put off by the red tape and by additional charges that Fannie Mae and Freddie Mac, which ultimately own or insure many of the mortgages, have imposed on applicants.
Then there are folks whose mortgages are way underwater. One option: Force the banks to foreclose on them and get the whole nightmare over with. But that would dump yet more properties on the market. A better solution, which has never seriously been tried, would be to expand the mortgage-modification program, offering interest rate reductions and principal write-offs in return for options on the upside value of the property. For example, the government and the bank could reduce my friend's mortgage to $150,000 -- 150% of the property's current value -- but demand half of any profit he makes when he eventually sells the property.
The details would need working on -- there's a tradeoff between maximizing uptake and minimizing rewards to irresponsible borrowers -- but surely it is worth trying. Three years of fiddling with the housing problem haven't gotten us very far.
--John Cassidy is a Fortune contributor and a New Yorker staff writer.
This article is from the October 17, 2011 issue of Fortune.
By John Cassidy, contributor
FORTUNE -- Is this a great country or what? At the start of last year, a friend of mine, the proprietor of a small business that has suffered badly in the recession, entered a trial mortgage-modification program. A few months later the bank told him that his application for a government-assisted refinancing rate had been turned down -- his house was too far underwater. He had bought it during the boom for $220,000, putting down $30,000, and then spent another $45,000 doing it up. Now it's worth about $100,000. Once his monthly payments were set to go back up (his mortgage rate is 6.5%), my friend stopped paying them and waited for the foreclosure and eviction notices to arrive. A year and a half later he is still inhabiting his own home and watching the mail.
Whenever I hear somebody saying that growth is about to pick up, I think about my friend and the roughly 11 million homeowners whose mortgages are worth more than their homes. Some of them are still making their monthly payments. Some, like my pal, are living for nothing. The drip-drip foreclosure crisis shows how, six years after the bursting of the real estate bubble, the U.S. residential real estate market is still a mess. And without a genuine revival in housing, it is hard to think we will ever get a self- sustaining recovery.
Sure, the news that President Obama and the Republicans are talking about enlarging this year's payroll tax cut and extending unemployment benefits through 2012 is good news. The last thing the economy needs is a $250 billion hit to spending, which is what doing nothing would amount to. But where are the serious proposals to revive the housing market? It's as if both parties have agreed to drop the issue.
Housing isn't just another industry: It's a driving force for the entire economy. Residential investment accounts for up to a quarter of overall capital investment. House prices have a big influence on consumer spending -- for every $1,000 the value of his house falls, a homeowner tends to cut his outlays by about $50 or $60. And falling property tax revenues are decimating many towns and cities. How bad is it out there? New-home construction is running at less than a third of its pre-recession level; in August it fell again. Existing-home sales picked up a bit, but that was largely because of bottom-fishing investors who are betting prices can't go any lower. Let's hope they are right. Nationwide, according to the S&P/Case-Shiller index, prices are down 6% over the past year and down 32% since the first quarter of 2006.
I'm not saying that fixing the housing market is easy. If it were, somebody would have done it. But to begin with, we could make the much-maligned Home Affordable Refinancing Program (HAMP) work better. Generally, anybody who is current on payments and whose home is worth at least 80% of the outstanding loan is eligible to participate. But many homeowners have been put off by the red tape and by additional charges that Fannie Mae and Freddie Mac, which ultimately own or insure many of the mortgages, have imposed on applicants.
Then there are folks whose mortgages are way underwater. One option: Force the banks to foreclose on them and get the whole nightmare over with. But that would dump yet more properties on the market. A better solution, which has never seriously been tried, would be to expand the mortgage-modification program, offering interest rate reductions and principal write-offs in return for options on the upside value of the property. For example, the government and the bank could reduce my friend's mortgage to $150,000 -- 150% of the property's current value -- but demand half of any profit he makes when he eventually sells the property.
The details would need working on -- there's a tradeoff between maximizing uptake and minimizing rewards to irresponsible borrowers -- but surely it is worth trying. Three years of fiddling with the housing problem haven't gotten us very far.
--John Cassidy is a Fortune contributor and a New Yorker staff writer.
This article is from the October 17, 2011 issue of Fortune.
Before You Choose Foreclosure!
BEFORE YOU CHOOSE FORECLOSURE, CONSIDER A SHORTSALE!
House Is Gone but Debt Lives On By JESSICA SILVER-GREENBERG
LEHIGH ACRES, Fla.—Joseph Reilly lost his vacation home here last year when he was out of work and stopped paying his mortgage. The bank took the house and sold it. Mr. Reilly thought that was the end of it.
In June, he learned otherwise. A phone call informed him of a court judgment against him for $192,576.71.
It turned out that at a foreclosure sale, his former house fetched less than a quarter of what Mr. Reilly owed on it. His bank sued him for the rest.
The result was a foreclosure hangover that homeowners rarely anticipate but increasingly face: a "deficiency judgment."
Remains of the Debt
Take a look at the homes in Lehigh Acres, Fla., where borrowers have been sued for deficiency judgments in the first seven months of 2011 and 2010.
View Interactive
..Forty-one states and the District of Columbia permit lenders to sue borrowers for mortgage debt still left after a foreclosure sale. The economics of today's battered housing market mean that lenders are doing so more and more.
Foreclosed homes seldom fetch enough to cover the outstanding loan amount, both because buyers financed so much of the purchase price—up to 100% of it during the housing boom—and because today's foreclosures take place following a four-year decline in values.
"Now there are foreclosures that leave banks holding the bag on more than $100,000 in debt," says Michael Cramer, president and chief executive of Dyck O'Neal Inc., an Arlington, Texas, firm that invests in debt. "Before, it didn't make sense [for banks] to expend the resources to go after borrowers; now it doesn't make sense not to."
Indeed, $100,000 was roughly the average amount by which foreclosure sales fell short of loan balances in hundreds of foreclosures in seven states reviewed by The Wall Street Journal. And 64% of the 4.5 million foreclosures since the start of 2007 have taken place in states that allow deficiency judgments.
Lenders still sue for loan shortfalls in only a small minority of cases where they legally could. Public relations is a limiting factor, some debt-buyers believe. Banks are reluctant to discuss their strategies, but some lenders say they are more likely to seek a deficiency judgment if they perceive the borrower to be a "strategic defaulter" who chose to stop paying because the property lost so much value.
Enlarge Image
CloseEdward Linsmier for The Wall Street Journal
Truck driver Ray Falero of Minneola, Fla., faced a 'deficiency judgment' for debt left when a foreclosure sale of his house in Orlando, Fla., didn't cover all he owed.
.In Lee County, Fla., where Mr. Reilly's vacation home was, court records show that 172 deficiency judgments were entered in the first seven months of 2011. That was up 34% from a year earlier. The increase was especially striking because total foreclosures were down sharply in the county, as banks continued to wrestle with paperwork problems that slowed the process.
One Florida lawyer who defends troubled homeowners, Matt Englett of Orlando, says his clients have faced 20 deficiency-judgment suits this year, up from seven during all of last year.
Until recently, "there was a false sense of calm" among borrowers who went through foreclosure, Mr. Englett says. "That's changing," he adds, as borrowers learn they may be financially on the hook even after the house is gone.
In Mr. Reilly's case, "there's not a snowball's chance in hell that we can pay" the deficiency judgment, says the 39-year-old man, who remains unemployed. He says he is going to speak to a lawyer about declaring bankruptcy next week, in an effort to escape the debt. The lender that obtained the judgment against him, Great Western Bank Corp. of Sioux Falls, S.D., declined to comment.
More
California Pulls Out of Foreclosure Talks
.Some close observers of the housing scene are convinced this is just the beginning of a surge in deficiency judgments. Sharon Bock, clerk and comptroller of Palm Beach County, Fla., expects "a massive wave of these cases as banks start selling the judgments to debt collectors."
In a paradox of the battered housing industry, trying to squeeze more money out of distressed borrowers contrasts with other initiatives that aim instead to help struggling homeowners, including by reducing what they owe.
The increase in deficiency judgments has sparked a growing secondary market. Sophisticated investors are "ravenous for this debt and ramping up their purchases," says Jeffrey Shachat, a managing director at Arca Capital Partners LLC, a Palo Alto, Calif., firm that finances distressed-debt deals. He says deficiency judgments will eventually be bundled into packages that resemble mortgage-backed securities.
Because most targets have scant savings, the judgments sell for only about two cents on the dollar, versus seven cents for credit-card debt, according to debt-industry brokers.
Silverleaf Advisors LLC, a Miami private-equity firm, is one investor in battered mortgage debt. Instead of buying ready-made deficiency judgments, it buys banks' soured mortgages and goes to court itself to get judgments for debt that remains after foreclosure sales.
Silverleaf says its collection efforts are limited. "We are waiting for the economy to somewhat heal so that it's a better time to go after people," says Douglas Hannah, managing director of Silverleaf.
Investors know that most states allow up to 20 years to try to collect the debts, ample time for the borrowers to get back on their feet. Meanwhile, the debts grow at about an 8% interest rate, depending on the state.
Enlarge Image
CloseMelissa Golden for The Wall Street Journal
Retiree Julia Ingham of Gaithersburg, Md., faced a judgment related to a foreclosed property in Lehigh Acres, Fla.
.Mr. Hannah expects the market to expand as banks "aggressively unload" their distressed mortgages in the next year, driving up the number of deficiency judgments being sought.
They are pretty easy to get. "If the house sold for less than you owe, the lender wins, plain and simple," says Roy Foxall, a real-estate lawyer in Fort Myers on Florida's west coast.
Mr. Foxall says five deficiency suits were filed against his clients this year, and he couldn't poke any holes in any of them. Lenders typically have five years following a foreclosure sale to sue for remaining mortgage debt.
Mr. Englett, the Orlando lawyer who has handled 27 such suits for homeowners in the past 21 months, says he didn't get the bank to waive the deficiency in any of the cases, but did reach six settlements in which the plaintiff accepted less.
Florida is among the biggest deficiency-judgment states. Since the start of 2007, it has had more foreclosures than any other state that allows deficiency judgments—more than 9% of the U.S. total, according to research firm Lender Processing Services Inc.
A loan-deficiency suit can yank borrowers back to a nightmare they thought was over.
Ray Falero, a truck driver whose Orlando home was foreclosed on and sold in August 2010, says he thought he was hallucinating when, months later, he opened the door and saw a sheriff's deputy. The visitor handed him a notice saying he was being sued for $78,500 by the lender on the home purchase, EverBank Financial Corp., of Jacksonville, Fla.
"I thought I was done with this whole mess," he says.
Mr. Falero, 37, says he was about nine months behind on his loan when the bank foreclosed. Before it did, he bought another home in Minneola, Fla., where he now lives and where he says he is up to date on mortgage payments. Like Mr. Reilly, Mr. Falero says he didn't swell the foreclosed-on loan through refinancing or home-equity borrowing.
Leftover Debt
Some of the 41 U.S. states where lenders can pursue deficiency judgments:
Florida
Georgia
Illinois
Michigan
New Jersey
New York
North Carolina
Ohio
Pennsylvania
Texas
.EverBank won a deficiency judgment on Mr. Falero's Orlando loan. Mr. Falero and his lawyer are fighting to reduce the amount owed. EverBank declined to comment on his case.
Credit unions and smaller banks are the most aggressive pursuers of deficiency judgments, a review of court records in several states shows.
At Suncoast Schools Federal Credit Union in Tampa, Jim Simon, manager of loss and risk mitigation, says the institution has a responsibility to its members, and that means trying to recoup losses by going after loan deficiencies. He calls such legal action the credit union's "last arrow in the quiver."
The biggest banks appear to have stayed largely on the sidelines as they deal with the foreclosure-paperwork mess. One big bank, J.P. Morgan Chase & Co., "may obtain a deficiency" judgment in foreclosure cases but will "often waive" the leftover debt when a homeowner agrees to a so-called short sale of a house for less than is owed on it, a bank spokesman says.
Among the hardest-hit spots in Florida is Lehigh Acres, a 95-square-mile unincorporated sprawl of narrow, cracked-pavement streets about 15 miles inland from Fort Myers.
Lehigh Acres was carved out of scrub land and cattle farms in the 1950s by a Chicago businessman, Lee Ratner, who had made a fortune on d-CON rat poison, says Gary Mormino, a history professor at the University of South Florida in St. Petersburg. Before he died, Mr. Ratner sold prefabricated houses to families hungry for a slice of paradise.
Decades later, Lehigh Acres (population 68,265) attracted people eager to cash in on the housing boom, even though it is distant from the sugary white beaches on the Gulf of Mexico. Speculative investors bought more than half of homes sold in Lehigh Acres in 2005 and 2006, Bob Peterson, a real-estate agent, estimates.
Many of those stucco homes now stand empty, priced at about a third of the value they had at the peak of the housing boom, which was often around $300,000.
In the first seven months of this year, courts entered 42 deficiency judgments in Lehigh Acres, for a total of $7 million, up from 26 judgments for $4.6 million in the same period of 2010, according to a Wall Street Journal analysis of state-court records.
Fifth Third Bancorp, of Cincinnati, filed for the largest share of deficiency judgments in Lehigh Acres last year. The bank declined to comment.
"It's eerily quiet around here," says Jon Divencenzo, who bought a house in Lehigh Acres at a May foreclosure sale for $50,000. Some nights, he says, the only sounds are rustling pine trees and the idling car engines of former homeowners circling the block to glimpse what they lost.
The hard-hit area reveals a sharp contrast in homeowners' attitudes toward deficiency judgments.
Julia Ingham invested in four Lehigh Acres properties in June 2005, hoping to "drum up some real money for retirement."
All have since been foreclosed on by lenders, says the 62-year-old retired programmer for International Business Machines Corp.
A credit union, after selling one of the foreclosed houses for less than the debt on it, obtained a deficiency judgment against Ms. Ingham for $181,059.54. She worries she could face such judgments on the other properties, too.
Ms. Ingham says when she bought them, she misunderstood how much her investments put her on the hook for. Her builder, she says, promised she could invest $10,000 in four properties and then flip them for a profit. Ms. Ingham says deficiency judgments punish borrowers who were taken advantage of by lenders and builders.
Catherine Ortega, who owns a Lehigh Acres home around the corner from one of Ms. Ingham's foreclosed homes, says banks should leave people like her former neighbor alone. "Those people have suffered enough," she says.
In July 2005, Mr. Reilly took out a $223,000 mortgage to build a vacation home here, about 160 miles from his primary home in Odessa, Fla. He was laid off just as construction was being completed.
Mr. Reilly says he is current on the loan on his primary residence but couldn't afford the vacation home's $1,200-a-month loan payment. Great Western Bank, which is owned by National Australia Bank Ltd., foreclosed on his house in Lehigh Acres in July 2010.
Mr. Reilly, who was a mortgage broker before his layoff, says he knew that deficiency judgments were possible after a foreclosure but didn't expect to face one because he doesn't have any financial assets, and you can't get "blood from a stone."
Alfredo Callado, who lives next door to Mr. Reilly's former house, is unsympathetic. Like Ms. Ortega, Mr. Callado is troubled by the crime that a neighborhood full of empty houses attracts. He started watching over Mr. Reilly's former house to ward off thieves who steal air conditioners from vacant properties.
Mr. Callado, sitting on a lawn chair in his driveway, says lenders should use deficiency suits to punish defaulting homeowners for the damage they do to neighborhoods, including driving down property values.
"You have to make them pay for what they do to those of us left behind," he says.
House Is Gone but Debt Lives On By JESSICA SILVER-GREENBERG
LEHIGH ACRES, Fla.—Joseph Reilly lost his vacation home here last year when he was out of work and stopped paying his mortgage. The bank took the house and sold it. Mr. Reilly thought that was the end of it.
In June, he learned otherwise. A phone call informed him of a court judgment against him for $192,576.71.
It turned out that at a foreclosure sale, his former house fetched less than a quarter of what Mr. Reilly owed on it. His bank sued him for the rest.
The result was a foreclosure hangover that homeowners rarely anticipate but increasingly face: a "deficiency judgment."
Remains of the Debt
Take a look at the homes in Lehigh Acres, Fla., where borrowers have been sued for deficiency judgments in the first seven months of 2011 and 2010.
View Interactive
..Forty-one states and the District of Columbia permit lenders to sue borrowers for mortgage debt still left after a foreclosure sale. The economics of today's battered housing market mean that lenders are doing so more and more.
Foreclosed homes seldom fetch enough to cover the outstanding loan amount, both because buyers financed so much of the purchase price—up to 100% of it during the housing boom—and because today's foreclosures take place following a four-year decline in values.
"Now there are foreclosures that leave banks holding the bag on more than $100,000 in debt," says Michael Cramer, president and chief executive of Dyck O'Neal Inc., an Arlington, Texas, firm that invests in debt. "Before, it didn't make sense [for banks] to expend the resources to go after borrowers; now it doesn't make sense not to."
Indeed, $100,000 was roughly the average amount by which foreclosure sales fell short of loan balances in hundreds of foreclosures in seven states reviewed by The Wall Street Journal. And 64% of the 4.5 million foreclosures since the start of 2007 have taken place in states that allow deficiency judgments.
Lenders still sue for loan shortfalls in only a small minority of cases where they legally could. Public relations is a limiting factor, some debt-buyers believe. Banks are reluctant to discuss their strategies, but some lenders say they are more likely to seek a deficiency judgment if they perceive the borrower to be a "strategic defaulter" who chose to stop paying because the property lost so much value.
Enlarge Image
CloseEdward Linsmier for The Wall Street Journal
Truck driver Ray Falero of Minneola, Fla., faced a 'deficiency judgment' for debt left when a foreclosure sale of his house in Orlando, Fla., didn't cover all he owed.
.In Lee County, Fla., where Mr. Reilly's vacation home was, court records show that 172 deficiency judgments were entered in the first seven months of 2011. That was up 34% from a year earlier. The increase was especially striking because total foreclosures were down sharply in the county, as banks continued to wrestle with paperwork problems that slowed the process.
One Florida lawyer who defends troubled homeowners, Matt Englett of Orlando, says his clients have faced 20 deficiency-judgment suits this year, up from seven during all of last year.
Until recently, "there was a false sense of calm" among borrowers who went through foreclosure, Mr. Englett says. "That's changing," he adds, as borrowers learn they may be financially on the hook even after the house is gone.
In Mr. Reilly's case, "there's not a snowball's chance in hell that we can pay" the deficiency judgment, says the 39-year-old man, who remains unemployed. He says he is going to speak to a lawyer about declaring bankruptcy next week, in an effort to escape the debt. The lender that obtained the judgment against him, Great Western Bank Corp. of Sioux Falls, S.D., declined to comment.
More
California Pulls Out of Foreclosure Talks
.Some close observers of the housing scene are convinced this is just the beginning of a surge in deficiency judgments. Sharon Bock, clerk and comptroller of Palm Beach County, Fla., expects "a massive wave of these cases as banks start selling the judgments to debt collectors."
In a paradox of the battered housing industry, trying to squeeze more money out of distressed borrowers contrasts with other initiatives that aim instead to help struggling homeowners, including by reducing what they owe.
The increase in deficiency judgments has sparked a growing secondary market. Sophisticated investors are "ravenous for this debt and ramping up their purchases," says Jeffrey Shachat, a managing director at Arca Capital Partners LLC, a Palo Alto, Calif., firm that finances distressed-debt deals. He says deficiency judgments will eventually be bundled into packages that resemble mortgage-backed securities.
Because most targets have scant savings, the judgments sell for only about two cents on the dollar, versus seven cents for credit-card debt, according to debt-industry brokers.
Silverleaf Advisors LLC, a Miami private-equity firm, is one investor in battered mortgage debt. Instead of buying ready-made deficiency judgments, it buys banks' soured mortgages and goes to court itself to get judgments for debt that remains after foreclosure sales.
Silverleaf says its collection efforts are limited. "We are waiting for the economy to somewhat heal so that it's a better time to go after people," says Douglas Hannah, managing director of Silverleaf.
Investors know that most states allow up to 20 years to try to collect the debts, ample time for the borrowers to get back on their feet. Meanwhile, the debts grow at about an 8% interest rate, depending on the state.
Enlarge Image
CloseMelissa Golden for The Wall Street Journal
Retiree Julia Ingham of Gaithersburg, Md., faced a judgment related to a foreclosed property in Lehigh Acres, Fla.
.Mr. Hannah expects the market to expand as banks "aggressively unload" their distressed mortgages in the next year, driving up the number of deficiency judgments being sought.
They are pretty easy to get. "If the house sold for less than you owe, the lender wins, plain and simple," says Roy Foxall, a real-estate lawyer in Fort Myers on Florida's west coast.
Mr. Foxall says five deficiency suits were filed against his clients this year, and he couldn't poke any holes in any of them. Lenders typically have five years following a foreclosure sale to sue for remaining mortgage debt.
Mr. Englett, the Orlando lawyer who has handled 27 such suits for homeowners in the past 21 months, says he didn't get the bank to waive the deficiency in any of the cases, but did reach six settlements in which the plaintiff accepted less.
Florida is among the biggest deficiency-judgment states. Since the start of 2007, it has had more foreclosures than any other state that allows deficiency judgments—more than 9% of the U.S. total, according to research firm Lender Processing Services Inc.
A loan-deficiency suit can yank borrowers back to a nightmare they thought was over.
Ray Falero, a truck driver whose Orlando home was foreclosed on and sold in August 2010, says he thought he was hallucinating when, months later, he opened the door and saw a sheriff's deputy. The visitor handed him a notice saying he was being sued for $78,500 by the lender on the home purchase, EverBank Financial Corp., of Jacksonville, Fla.
"I thought I was done with this whole mess," he says.
Mr. Falero, 37, says he was about nine months behind on his loan when the bank foreclosed. Before it did, he bought another home in Minneola, Fla., where he now lives and where he says he is up to date on mortgage payments. Like Mr. Reilly, Mr. Falero says he didn't swell the foreclosed-on loan through refinancing or home-equity borrowing.
Leftover Debt
Some of the 41 U.S. states where lenders can pursue deficiency judgments:
Florida
Georgia
Illinois
Michigan
New Jersey
New York
North Carolina
Ohio
Pennsylvania
Texas
.EverBank won a deficiency judgment on Mr. Falero's Orlando loan. Mr. Falero and his lawyer are fighting to reduce the amount owed. EverBank declined to comment on his case.
Credit unions and smaller banks are the most aggressive pursuers of deficiency judgments, a review of court records in several states shows.
At Suncoast Schools Federal Credit Union in Tampa, Jim Simon, manager of loss and risk mitigation, says the institution has a responsibility to its members, and that means trying to recoup losses by going after loan deficiencies. He calls such legal action the credit union's "last arrow in the quiver."
The biggest banks appear to have stayed largely on the sidelines as they deal with the foreclosure-paperwork mess. One big bank, J.P. Morgan Chase & Co., "may obtain a deficiency" judgment in foreclosure cases but will "often waive" the leftover debt when a homeowner agrees to a so-called short sale of a house for less than is owed on it, a bank spokesman says.
Among the hardest-hit spots in Florida is Lehigh Acres, a 95-square-mile unincorporated sprawl of narrow, cracked-pavement streets about 15 miles inland from Fort Myers.
Lehigh Acres was carved out of scrub land and cattle farms in the 1950s by a Chicago businessman, Lee Ratner, who had made a fortune on d-CON rat poison, says Gary Mormino, a history professor at the University of South Florida in St. Petersburg. Before he died, Mr. Ratner sold prefabricated houses to families hungry for a slice of paradise.
Decades later, Lehigh Acres (population 68,265) attracted people eager to cash in on the housing boom, even though it is distant from the sugary white beaches on the Gulf of Mexico. Speculative investors bought more than half of homes sold in Lehigh Acres in 2005 and 2006, Bob Peterson, a real-estate agent, estimates.
Many of those stucco homes now stand empty, priced at about a third of the value they had at the peak of the housing boom, which was often around $300,000.
In the first seven months of this year, courts entered 42 deficiency judgments in Lehigh Acres, for a total of $7 million, up from 26 judgments for $4.6 million in the same period of 2010, according to a Wall Street Journal analysis of state-court records.
Fifth Third Bancorp, of Cincinnati, filed for the largest share of deficiency judgments in Lehigh Acres last year. The bank declined to comment.
"It's eerily quiet around here," says Jon Divencenzo, who bought a house in Lehigh Acres at a May foreclosure sale for $50,000. Some nights, he says, the only sounds are rustling pine trees and the idling car engines of former homeowners circling the block to glimpse what they lost.
The hard-hit area reveals a sharp contrast in homeowners' attitudes toward deficiency judgments.
Julia Ingham invested in four Lehigh Acres properties in June 2005, hoping to "drum up some real money for retirement."
All have since been foreclosed on by lenders, says the 62-year-old retired programmer for International Business Machines Corp.
A credit union, after selling one of the foreclosed houses for less than the debt on it, obtained a deficiency judgment against Ms. Ingham for $181,059.54. She worries she could face such judgments on the other properties, too.
Ms. Ingham says when she bought them, she misunderstood how much her investments put her on the hook for. Her builder, she says, promised she could invest $10,000 in four properties and then flip them for a profit. Ms. Ingham says deficiency judgments punish borrowers who were taken advantage of by lenders and builders.
Catherine Ortega, who owns a Lehigh Acres home around the corner from one of Ms. Ingham's foreclosed homes, says banks should leave people like her former neighbor alone. "Those people have suffered enough," she says.
In July 2005, Mr. Reilly took out a $223,000 mortgage to build a vacation home here, about 160 miles from his primary home in Odessa, Fla. He was laid off just as construction was being completed.
Mr. Reilly says he is current on the loan on his primary residence but couldn't afford the vacation home's $1,200-a-month loan payment. Great Western Bank, which is owned by National Australia Bank Ltd., foreclosed on his house in Lehigh Acres in July 2010.
Mr. Reilly, who was a mortgage broker before his layoff, says he knew that deficiency judgments were possible after a foreclosure but didn't expect to face one because he doesn't have any financial assets, and you can't get "blood from a stone."
Alfredo Callado, who lives next door to Mr. Reilly's former house, is unsympathetic. Like Ms. Ortega, Mr. Callado is troubled by the crime that a neighborhood full of empty houses attracts. He started watching over Mr. Reilly's former house to ward off thieves who steal air conditioners from vacant properties.
Mr. Callado, sitting on a lawn chair in his driveway, says lenders should use deficiency suits to punish defaulting homeowners for the damage they do to neighborhoods, including driving down property values.
"You have to make them pay for what they do to those of us left behind," he says.
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