Legal Question in Real Estate Law in Pennsylvania

Why necessarily would there be a deficiency on a deed in lieu of foreclosure? A deed-in-lieu (DIL) is an alternative to foreclosure. In a DIL, you are voluntarily conveying the property back to the bank and they voluntarily accept it. There would not be any obligation on your part to pay anything.

But what do your DIL agreements say? Do the agreements indicate that accepting the property will end your obligation? Was the property worth at least as much as was owed on the house? Since this is an FHA, are there any FHA requirements that prohibit/mandate a foreclosure action?

There is a 6 month statute of limitations for deficiency judgments as per 42 Pa CSA � 5522(b). However, deficiency judgments are governed by 42 Pa. CSA � 8103 and seem to imply that a foreclosure action is filed first. Since there was not one here, it doesn't make sense. The 6 months begins to run from the time of the foreclosure sale.

I have heard of lenders (usually second mortgage holders) suing on the note rather than foreclosing on the real property. Usually, in those cases, the holder of the first mortgage has already foreclosed and wiped out any junior liens. If a borrower has assets, the second lender may then bring an action on the note itself. In PA, if the note was under seal, the statute of limitations would be 20 years, but that does not appear to be your case either.