Deficiency judgments stem from the fact the borrower defaulted on a promissory note, not the mortgage. A promissory note is a promise to pay. It can also create personal liability, depending on state laws. Personal liability means the lender can go after the borrower’s assets for failure to pay a loan.
After the Foreclosure: Deficiency Judgments and Taxes If you are facing foreclosure, or have lost your home through foreclosure, you might still owe your mortgage lender money after the sale. This happens if the foreclosure sale price is less than the amount remaining on your mortgage – it’s called a "deficiency."
A deficiency judgment is an unsecured money judgment against a borrower whose mortgage foreclosure sale did not produce sufficient funds to pay the underlying promissory note, or loan, in full. The availability of a deficiency judgment depends on whether the lender has a recourse or nonrecourse loan, which is largely a matter of state law.
A mortgage deficiency waiver frees you of the burden of having to pay back the rest of your mortgage in the event your house sells through a short sale. Otherwise, you may end up having to pay the mortgage off even though you took less for your home and may not be able to afford to do so.
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When a lender forecloses on a mortgage, the debt often exceeds the amount that the lender recovers through the foreclosure sale. In states classified as "non-recourse," the lender cannot seek a judgment against the debtor to recover the deficiency. "Recourse" states allow lenders to seek a deficiency judgment against the debtor.
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Another factor of pursuing a deficiency judgment is whether or not pmi (private mortgage insurance) is involved. Borrowers with less than 20% down are typically required to pay PMI. If PMI is involved, a lender will look to collect from the insurance company to be made whole.
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If the home sells for $400,000 and your state allows lenders to collect deficiency judgments, you will owe your lender $100,000 once they obtain a judgment for the deficiency. In many cases, this deficiency judgment is a tough pill to swallow for the borrower who just lost their home and yet still owes their lender after foreclosure.
GMAC Halts All Foreclosures In 23 States On Heels Of Florida Judge finding jpm committed court Fraud In Mortgage Misappropriation GMAC Halts All Foreclosures In 23 States On Heels Of Florida Judge Finding JPM Committed Court Fraud In Mortgage Misappropriation Submitted by Tyler Durden on 09/20/2010 08:39 -0500 As we pointed out last week , a certain judge in Florida set quite a precedent when he found that JPM, as servicer for a Fannie mortgage, had committed court fraud.