Bringing the Economy Home

Small Banks May Be More Likely to Sue Former Homeowners

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Home owners met with a Bank of America negotiator last summer, in hopes of restructuring a mortgage loan.

Bank of America is the bank mentioned in our recent story about lenders suing homeowners for the amount of the mortgage that remains after a foreclosure, but it may be that smaller banks are more likely than large ones to pursue what are called deficiency claims.

Terri Pickens, an attorney with Pickens Law in Boise, has come to that conclusion, based on her experience representing clients who have been served with deficiency judgments.  “The small banks pursue everything,” she said.  “I have not seen Bank of America pursue them.  In my clients’ cases, whether it was a modest house to a multimillion dollar house, they haven’t gone after the deficiency.”  Attorney Brian Webb of Angstman Johnson agrees with Pickens’ analysis.

As for the banks, large and small, they prefer to say little on the subject.  I called and e-mailed several, asking for information about how they determine when to pursue deficiency claims.  A Wells Fargo spokesman issued this brief response: “Where permitted, we may pursue deficiency judgments on a case-by-case basis.”  Bank of America has yet to reply, two weeks after StateImpact Idaho‘s initial request and despite significant follow-up.

Spokane-based Sterling Savings Bank was described in interviews with Pickens and another attorney as a bank that has been especially persistent about filing deficiency judgments against homeowners.  I called the bank to ask about it.  In an e-mailed response, a spokeswoman said only that Sterling Savings does have  policies for determining when to pursue former homeowners for deficiencies, but those policies are internal.  “Deficiency judgements are extremely complex and are only pursued as a way to seek repayment for monies rightfully owed to the bank,” she wrote.

However, this 2010 article from The Oregonian, featuring an interview with Sterling President and CEO Greg Seibly, sheds a bit of light.  According to the article, the bank, which had missed a deadline from federal and state regulators to raise new capital, “launched an aggressive legal campaign to recover its losses.”

This fits with attorney Terri Pickens’ hypothesis about why some banks are more likely than others to file deficiency claims.  “It’s basically the banks that need the capital,” she said.


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