What is a deficiency judgment?
In some states, when the proceeds of a foreclosure sale are insufficient to pay the underlying obligation, the lender simply applies the proceeds against the debt and the foreclosure costs then sues the defaulting borrower for the remaining balance (called the deficiency). If successful, the lender obtains a “deficiency judgment” against the defaulting borrower. After the Great Depression in the 1930s, however, many states enacted laws called “Anti-Deficiency Judgment” statutes, designed to regulate, limit, or even eliminate a lender’s right to obtain a deficiency judgment. Not every state has such statutes, and there is a good deal of variance from state to state. In its purest form, the statute provides that a lender’s sole recourse is to the land. This means that after a foreclosure the mortgage obligation is completely discharged regardless of the amount of the sales proceeds. In other states, including Massachusetts, the lender retains the right to seek a deficiency judgment, but
Related Questions
- Can a Lender Sue a Borrower for a Deficiency Judgment if the Lender is Still Owed Money After a Foreclosure Sale in New Hampshire?
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