A deficiency judgment is a court judgment lien against a borrower whose home was foreclosed on and the sale did not produce sufficient monies to pay the home loan in full.  For example, if you have a first mortgage for $300,000 and your home is only worth $200,000, you would owe the $100,000 difference if there was a judgment against you.

  • To answer this question, one would have to be familiar with their state foreclosure laws.  Are you?

If you are not familiar with your state laws, I recommend Googling your state foreclosure laws in order to get familiar with them ASAP. You need to have a basic understanding of the foreclosure process and each state is different. You can also look for your state in our forum here.

Some homeowner friendly states like Arizona, protect people who purchase property.  Not all mortgage borrowers are protected in this state,but those who have obtained home loans to purchase property and have not refinanced are most likely covered by this law.  The property has to be 2 1/2 acres or less and is limited to that of single family or single two family residences.

Unfortunately, if you have refinanced your mortgage or you have an investment property, those loans are probably recourse and your lender may pursue a deficiency judgment against you. Please keep in mind that these are not automatic, your lender must first go to court and seek a deficiency judgment order. 

The reality is that most homeowners today are pioneers in this new era of debt collections and mortgages gone bad.  Only the near future will tell us exactly what is gonna happen as many borrowers face the foreclosure music.

Moe Bedard
My name is Maurice "Moe" Bedard. I am the founder of America's #1 Mortgage Forum, LoanSafe.org. My online work has been featured in the New York Times, LA Times, Fox Business, and many other media publications.