Deficiency Judgment - A deficiency judgment is the result of a judicial foreclosure, the process by which a lender takes you, the borrower, to court in an attempt to receive a judgment for the amount that they claim you owe them above and beyond the principal and interest you owe on your loan.

The lender has 90 days to start the motion for a deficiency judgement after a foreclosure sale and the market value of the property must be determined by the court.

In most cases, lenders do not pursue homeowners who have lost their homes to foreclosure and thereby incur a deficiency judgment. Although they may receive a 1099 income statement, lenders realize that they average person who looses their home to foreclosure, most likely will not have the funds to make due on a deficency judgment.

In certain states, most notably California, homeowners may not be liable for any deficiency on their mortgage, provided that the mortgage you have on your home is the original one you took out when you purchased the home. This "purchase money" security interest provision means that under California law, you are not entitled to pay deficiencies on your mortgage unless you have refinanced the mortgage since you bought the home. 2nd mortgages which were taken out at the same time as the "purchase money" or original mortgage may also be covered by this provision, however you must consult a legal professional for advice pertaining to your own situation.

In most states, the lender will not pursue obtaining a judgment to cure deficiencies unless the amount owed as a deficiency is very substantial. This is due primarily o the high cost of working through the courts ina judicial foreclosure. Most lenders prefer a non-judicial foreclosure.

If you are seeking information about a deficiency judgment, chances are you are looking down the barrel of a trustee or sherrif sale of your property during a foreclosure. You still may have options to refinance if you have equity in the property (30% or more), and if not you may consider other options. Contact us at 414-303-1215 for more information about foreclosure refinancing.

A deficiency judgment is a lien against the borrower when a foreclosure sale does not satisfy the amount of the mortgage.

 

 ++