Deficiency
Whether a financial entity decides to decide peruse or not a deficiency judgment it is a complex topics and is driven by five main angles
1. Classification of Assets set by the Federal Reserve and Office of Thrift Supervision
2. Federal Reserve and FDIC Requirement on Non-Performing Assets
3. Generally Accepted Accounting Principles (GAAP)
The references provided below are consistent with the common practice: it is highly unlikely to make financial sense for a federally regulated financial intuition to keep a non-performing asset on the books, lose the tax deduction benefits and accrue additional legal fees in order to be able to collect on deficiency judgment.
On the other hand investors of loans sold on the secondary market – typically deeply discounted – can benefit on pursuing collection on deficiency judgments. This especially can be common on second liens which are sold on the secondary market to investors literally pennies on the dollar.
All the provided references have nothing to do with the release of liens as a part of the short sale process.
