Maryland Narrows Time Frame for Seeking Deficiency Judgments against Borrowers


The amount of time that mortgage lenders and servicers have to seek a deficiency judgment against borrowers will be shortened from 12 years to three years under new legislation enacted in Maryland. The new law takes effect July 1, 2014.

Under current Maryland law, when the proceeds of a residential foreclosure sale are insufficient to pay off the entire loan, a lender or servicer usually has up to 12 years to seek a deficiency judgment against a defaulting borrower. That is because most mortgages, deeds of trust, and promissory notes are executed "under seal," making them subject to a special 12-year statute of limitations.

The new law, signed by Governor Martin O'Malley last week, will eliminate the special 12-year limitations period for mortgages, deeds of trust, and promissory notes that secure or are secured by residential property. Instead, lenders will have just three years from the date of the court's final ratification of the foreclosure to seek a deficiency judgment.

In addition, the new law makes a motion for the deficiency judgment within the foreclosure action the lender's only remedy for seeking to collect a deficiency after a residential foreclosure. Existing Maryland law permitted lenders to file a separate action for breach of contract after a foreclosure was completed. That option will no longer be available under the new law.


Written by:

Published In:

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Ballard Spahr LLP | Attorney Advertising

Don't miss a thing! Build a custom news brief:

Read fresh new writing on compliance, cybersecurity, Dodd-Frank, whistleblowers, social media, hiring & firing, patent reform, the NLRB, Obamacare, the SEC…

…or whatever matters the most to you. Follow authors, firms, and topics on JD Supra.

Create your news brief now - it's free and easy »

All the intelligence you need, in one easy email:

Great! Your first step to building an email digest of JD Supra authors and topics. Log in with LinkedIn so we can start sending your digest...

Sign up for your custom alerts now, using LinkedIn ›

* With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name.