A deficiency judgment may occur when a mortgage lender pursues legal action against a borrower to recover an unpaid debt on a foreclosed property. Mortgage lenders may choose to file a deficiency judgment lawsuit when they are still owed money after a short sale or foreclosure. Homeowners in foreclosure are encouraged to learn as much as possible about deficiency judgments in order to have the best opportunity at defending against them.
How Do Deficiency Judgments Work?
When a mortgage lender forecloses on a home, a deficiency judgment may not occur in every instance. For a mortgage lender to obtain a deficiency judgment, they are commonly required to file a motion for a deficiency judgment outlining the foreclosed home’s property value and the remaining unpaid balance on the mortgage. Mortgage lenders may also choose to seek unpaid interest, penalties and legal fees with the deficiency judgment as well.
Homeowners may choose to defend the motion by contesting the lawsuit. A hearing is then likely to be held where mortgage lenders can present evidence demonstrating to the court how the property’s value on the sale date was less than remaining balance on the mortgage. If the court finds the foreclosed home was worth less than the remaining balance on the mortgage, they may approve the mortgage lender’s request for a deficiency judgment.
After a mortgage lender achieves a deficiency judgment, they may be able to garnish wages and/or place a lien on the debtor for additional money.
Defending Against a Deficiency Judgment
Defending against a deficiency judgment can be a very difficult task without the help of an experienced attorney. Homeowners may be able to build a strong case against a deficiency judgment with evidence of predatory lending, robosigning, and/or some other discover of fraudulent documents filed in the foreclosure case. Additionally, filing for bankruptcy may be a viable option for defending against a deficiency judgment lawsuit. Homeowners may benefit greatly from speaking with an attorney about how to respond to a deficiency judgment lawsuit.