What does a deficiency judgment refer to?

A deficiency judgment specifically relates to the balance that remains on a mortgage or note after a foreclosure sale has taken place and the property has been sold. When a property is foreclosed upon, it is usually sold at auction, and if the sale price is less than the total amount owed on the mortgage, the lender may seek to recover the remaining balance through a deficiency judgment.

This judgment allows the lender to pursue the borrower for the unpaid amount, highlighting the continued liability of the borrower, even after losing the property. It typically occurs when the sale proceeds do not cover the entire debt, thereby creating a deficiency that warrants legal recourse by the lender. Understanding this concept is important because it illustrates the potential financial implications a homeowner can face even after foreclosure, underlining the importance of addressing mortgage arrears proactively.