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Deficiency Judgment
Practical Law Glossary Item w-000-1782 (Approx. 3 pages)
Glossary
Deficiency Judgment
A monetary judgment obtained by a lender against a borrower where the proceeds from a foreclosure sale do not fully cover the amount of the underlying mortgage loan.
Deficiency judgment laws vary widely on a state-by-state basis. Some states allow the lender to recover costs and fees it incurred in connection with the foreclosure and deficiency judgment actions. Other states prohibit or severely limit deficiency judgments through anti-deficiency laws that:
- Prohibit the recovery of any deficiency following a nonjudicial foreclosure by power of sale.
- Limit the deficiency to the difference between the loan balance owing and the greater of:
- the foreclosure sale price; or
- the market value of the property.
A lender cannot seek a deficiency judgment against a borrower when the loan is nonrecourse. For a state-by-state guide to real estate finance law, see Real Estate Finance: State Q&A Tool.