What Is a Deficiency Judgement?

A deficiency judgment is levied against an individual who has gone into foreclosure and still owes money on his mortgage. If the house is sold and there is still a balance left over, the lender could potentially sue the homeowner for the extra money. If the judgement is successful, the individual will have to come up with the additional money to pay the lender.

A deficiency judgement is not always possible when dealing with a foreclosure situation. In some cases, once the lender forecloses on the property, it cannot take any further action against the former homeowner. The matter depends on whether the mortgage was a non-recourse loan or a recourse loan. If the mortgage was a non-recourse loan, the lender cannot take any further action to collect the extra balance from the homeowner. If the mortgage is a recourse loan, it can come after him for the extra money. 

The laws of the state in which the mortgage was originated will typically have a lot to do with what type of mortgage it is. Many states allow recourse loans, while other states allow only non-recourse mortgages.

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