deficiency judgment

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deficiency judgment

A lawsuit and judgment against a debtor for the remaining balance due on a promissory note after giving credit for any repossessed or foreclosed collateral.

Example:  Sarah has a mortgage for $200,000 on her home. She defaults on her loan, and the bank forecloses. The bank sells the home at a foreclosure auction to a third party who bids only $160,000 because the home has been allowed to deteriorate and needs many repairs. Sarah still owes the bank $40,000 unless she lives in a state that does not allow deficiencies on home loans. The bank may sue Sarah and obtain a judgment for $40,000, called a deficiency judgment.

References in periodicals archive ?
Further, the Court noted that since the bank was not a mortgagee in possession (for only then would the bank have been obliged to preserve the property from loss and injury and to conserve its value), the bank should not be denied a deficiency judgement.
The lender, Security Pacific, foreclosed on the first mortgage on 200 Madison Avenue and this sale was made to also satisfy a deficiency judgement resulting from the sale of the Herald Center.
But Fries added, "Banks have required us to commence deficiency judgement proceedings to give the message they will not walk away.

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