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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. How to thank TFD for its existence? Tell a friend about us, add a link to this page, add the site to iGoogle, or visit webmaster's page for free fun content. |
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The deficiency judgement would be calculated as the difference between the amount of the mortgage and the market value of the property or the highest bid at the foreclosure sale, which ever was higher. 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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