Most states allow deficiency judgments and unless the homeowner understands the foreclosure laws in their state, they may be pursued by their former lenders to make payments on an outstanding balance.
That is why, it is important to review the links that I have attached below to further understand the details of deficiency judgments in each state. Before you follow those links, let’s make sure you understand some important terms in foreclosure.
A deficiency judgment. simply stated, is a court ordered judgment against a borrower for the insufficient funds produced to pay the unpaid balance of the sale of real property upon foreclosure. Usually deficiency judgments occur in states that have judicial foreclosure laws.
“Judicial states follow the lien theory of mortgages and require foreclosure procedure but allow deficiency judgments against the borrower.” (wikipedia) In a recourse mortgage, the lender can go after the borrower’s other assets or sue to have his or her wages garnished.
“In 2014 Geoff Walsh, a staff attorney with the U.S. National Consumer Law Center, said on NPR that the United States is “seeing an uptick” in the pursuit of deficiency claims, because technological developments have enabled large debt-buying institutions and mortgage insurers to more easily pursue former borrowers, who often don’t know their legal rights.” (wikipedia)
Please review the table below to see if your are located in states allow deficiency judgments.
|District of Columbia||Yes|
The above report has been condensed, however more detail and a compilation of state laws in NCLC’s “Survey of State Foreclosure Laws,” part of a 2009 NCLC study, “Foreclosing a Dream,” written by John Rao and Geoff Walsh can be reviewed at the 2 links below:
If you were required to pay back a deficiency judgment, let us know the results. Share your experience.