A deficiency judgment is a court order that requires a borrower to pay the difference between what is owed on a mortgage loan and the amount the home sells for at foreclosure. In most cases, the proceeds from the sale of the property are used to pay off the mortgage debt, and if any money is left over, it goes to the borrower. However, if the property's sale price is less than what is owed on the mortgage loan, the lender can seek a deficiency judgment against the borrower. In some states, deficiency judgments are only allowed if the loan was secured by a deed of trust; in others, they are available for both deed of trust and mortgage loans. Deficiency judgments can significantly impact a borrower's financial standing, as they can be used to garnish wages or place a lien on the property. Borrowers need to understand their rights and options before entering foreclosure proceedings.
A deficiency judgment is a legal order requiring a borrower to pay the difference between the mortgage loan and the amount the home is sold for at foreclosure. In order for a lender to obtain a deficiency judgment, the law requires that the home be sold for less than what is owed on the mortgage and that the borrower be personally liable for the debt. If the borrower is not personally liable, the lender cannot go after the borrower's wages or property, with some exceptions. While deficiency judgments are not automatically granted, if a lender does request one and it is granted, the borrower will be responsible for paying the outstanding debt.
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