A lot of people end up losing their homes to foreclosure. Sometimes, a job loss or a sudden disability makes it impossible for someone to keep up with the mortgage. Sometimes, a marriage falls apart before there's enough equity in a home to sell it successfully, and neither spouse can afford to handle the mortgage payments alone. Sometimes, the price of real estate in an area just falls through, and borrowers feel compelled to walk away from mortgages that have put them underwater.
Whatever the reason, once a lender has foreclosed on a home, they will then (eventually) sell it at auction. Whatever the lender gets is usually not enough to cover the entire mortgage that was originally owed -- so the lender may decide to pursue a deficiency judgment.
Essentially, a deficiency judgment works like this:
You have a home that has a $1 million mortgage on it.
Something happens, and you have to let the home go into foreclosure.
The lender sells the home in a foreclosure sale to the highest bidder -- but because property values are down and bargain hunters are everywhere, they only make $600,000 on the sale.
The lender then initiates a lawsuit for the "deficiency" between what it obtained from the sale and the original mortgage, or $400,000.
If successful, you then owe $400,000 for a home that you no longer own.
Getting a deficiency judgment against you can subject you to a number of other financial problems as the lender tries to collect on the judgment. The lender may attempt to garnish your wages, attach your tax return and put liens on your other property. The good news is that there are solutions to this problem and ways to fight back through legal means. For more information, please continue to explore our website or contact us directly.