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Preventing Creditor Abuse of Deficiency Judgments: Some Good (and Not-So-Good) Approaches


Dale A. Whitman


August 6, 2015

In his recent article, Tools of Ignorance: An Appraisal of Deficiency Judgments, Professor Alan Weinberger accurately identifies both the benefits and detriments of statutory “fair value” limitations on deficiency judgments. The principal benefit of these statutes, of course, is that they stand in the way of a windfall double recovery by mortgage creditors. In many cases there is little or no competitive bidding at foreclosure sales, leaving the way clear for the creditor to bid at a level far below the property’s market value and thus, gain both the full value of the property and the amount of a deficiency measured by the artificially low bid. This is simply an outrage, and the basic principles of fairness demand some means of preventing it. On the other hand, determining what fair value is—indeed, defining what we mean by fair value—is often left ambiguous by fair value statutes. Even if the meaning is clear, determining value by a war of expert appraisal witnesses is a messy, complex, expensive, and often inaccurate process


Dale A. Whitman, Preventing Creditor Abuse of Deficiency Judgements: Some Good (and Not-so-Good) Approaches, 72 Wash. & Lee L. Rev. Online 89 (2015).