I find it hard to believe they filed a claim, although why did she allow the house to go to REO? There are so many options out there to stop foreclosure even if she has to sell the house. My personal opinion is that she should have stopped paying the insurance if she wasn't trying to workout a solution to stop foreclosure. The mortgage company would have force placed a policy and she could have saved the money although the force placed insurance would not cover her belongings just the home. It could be possible once the house went into REO that the mortgage company did place insurance on the property and they are filing a claim against their insurance.
Are you sure there was a deficiency judgment entered? I have not done short sales for a while, I know the big lenders are not going after homeowners for the deficiency just 1099, does anyone know of any mortgage companies that are filing judgments?
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