Lawmakers in Maryland early next year will consider a bill that would dramatically lower the allowed time debt collectors have to pursue mortgage deficiency debt collection after a home foreclosure.
When a lender forecloses on a house backed by a defaulted mortgage, the amount recovered from the sale, or valuation, of the home often does not cover the entire remaining loan. The leftover total is called a deficiency balance. Banks often place deficiency balances with third party debt collection agencies or law firms, or sell the debt outright.
Current Maryland law, similar to most other states, provides exemptions to debt statutes of limitations that allow debt collectors to file a collection suit up to 12 years after a foreclosure. [For more information on state statutes of limitations for debt, see Time is Running Out: Statute of Limitations for Debt Collection.]
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