1/29/2024 0 Comments Deficiency judgmentOther states, however, have anti-deficiency laws. Some States Have Anti-Deficiency Laws That Prohibit Deficiency Judgments In a deficiency lawsuit, assuming your state has this kind of law, the bank could recover only $25,000 ($450,000 minus $425,000), even though the deficiency was actually $50,000 ($450,000 minus $400,000). But the fair market value of the house is $425,000. The property sells in a foreclosure sale for $400,000. For example, again, say the amount you owe on your mortgage loan is $450,000. Many states that allow banks to seek deficiency judgments limit the amount that banks can recover to the difference between the outstanding loan amount and the home's fair market value. With a nonjudicial foreclosure, the bank must sue the borrower following the foreclosure to get a deficiency judgment. Some states, however, require the bank to file a separate action to recover the deficiency. In judicial foreclosures, the bank can usually request the judgment as part of the foreclosure lawsuit. Most states allow banks to go after borrowers for deficiency judgments. Does Your State Allow Deficiency Judgments? Once the bank has a deficiency judgment, it may try to collect this amount from you using regular collection methods, like garnishing your wages, levying your bank account, or placing a lien on other property you own. Then, if state law allows it, the bank may get a personal judgment against you for $50,000. Your home sells at a foreclosure sale for $400,000. Suppose you owe the bank $450,000 on your mortgage loan. What Is a Deficiency Judgment?Ī "deficiency judgment" is a money judgment against a borrower for the difference between the total amount of the mortgage debt and the foreclosure sale price.Įxample. In this article, you'll find general information about deficiency judgments, anti-deficiency laws, and get a brief summary about these laws in each state. An "anti-deficiency law" is a state statute (law) that prohibits foreclosing banks from suing borrowers for deficiency judgments. Many states allow the bank to get a personal judgment, called a "deficiency judgment," for this amount against the borrower. In the context of a foreclosure, a "deficiency" is the difference between what a borrower owes on a mortgage loan and the price at which the house is sold at a foreclosure sale. The Internet is not necessarily secure and emails sent through this site could be intercepted or read by third parties. The lawyer or law firm you are contacting is not required to, and may choose not to, accept you as a client. Any information sent through this site does not create an attorney-client relationship and may not be treated as privileged or confidential. You should not send any sensitive or confidential information through this site. Your number will be held in accordance with our Privacy Policy. You will receive up to 2 messages per week from Martindale-Nolo. Attorneys have the option, but are not required, to send text messages to you. You are not required to provide consent as a condition of service. Messages may be sent using pre-recorded messages, auto-dialer or other automated technology. Martindale-Nolo and up to 5 participating attorneys may contact you on the number you provided for marketing purposes, discuss available services, etc. By clicking "Find a Lawyer", you agree to the Martindale-Nolo Texting Terms.
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