Can certain laws negate a lenders ability to recover a deficiency award?

Certain states negate a lenders ability to recover a deficiency award. These states have what is known as "non-recourse" laws that prevent a lender from filing a deficiency judgment against a homeowner.  What is important however is to note that even in these states, this may only apply to a first mortgage on a property and not to a second mortgage or equity line.  Some states that negate a lenders ability to secure a deficiency award include Alaska, California (first mortgage only), Connecticut, Texas, North Carolina, Florida and others.

Other loan considerations

Other states demand that any foreclosure action be placed a single time. In states like Idaho, Montana (and a few others), a lender has the option of filing a foreclosure proceeding or filing a deficiency proceeding but not both.  This will vary largely on the individual foreclosure statutes for each state, but in some cases, this means that the laws will negate deficiency judgment for a lender.

In some cases, if you have refinanced a property, you may have enabled a lender to file a deficiency judgment in the event of foreclosure. Loan terms and conditions must be reviewed carefully to determine if you will be facing a deficiency judgment even in non-recourse states.

Second mortgage foreclosures

In the event that a homeowner is forced into foreclosure by a second mortgage holder, there are cases where a deficiency judgment pay be pursued by the first lender even in non-recourse states.  Homeowners will need to contact a foreclosure attorney to ensure they understand if a lender negate deficiency award is warranted.