Deficiency Judgment

When you lose your home to foreclosure or are short funds in paying off a debt to your mortgage lender, your mortgage lender may attempt to collect on that difference. If the lender goes to court and sues you and wins, the lender is said to have obtained a deficiency judgment against you. With that deficiency judgment, the lender can go after any other assets you may have. For example, if you own a home that was worth $250,000 with a $225,000 mortgage debt on it and you default on the loan and the lender forecloses on the home and sells the home for $175,000, the lender is out $50,000. The lender may then go to the court and ask the court to give the lender a judgment against you for $50,000 which the lender can then use to go after any other assets you may have. That judgment would be the deficiency judgment. Some states do not allow deficiency judgments.

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Can't Pay Mortgage? Homeowner Worries About Deficiency Judgment

What happens if you can't pay your mortgage? A homeowner worries about getting a deficiency judgment if her rental property falls into foreclosure because she can't pay the mortgage. Some states allow deficiency judgments on primary residences, but many do not. If your house is in foreclosure because you can't pay your mortgage, you'll want to make sure that the lender in your foreclosure can't come after you for a deficiency judgment. In some circles, when a lender can't go after the borrower for the debt, the debt is called a non-recourse loan.

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