Who is liable for a deficiency after foreclosure?

In a foreclosure sale, the homes usually do not sell for the full amount of the previous owner's mortgage note. This is an even more common scenario after the economic crisis. When the bank is unable to get mortgage payments from the borrower or the foreclosure sale, it may wish to pursue a deficiency judgment against the debtor for the remainder of the mortgage amount.

Some states have anti-deficiency laws, where the displaced homeowner can not be pursued for a deficiency judgment after the foreclosure sale has taken place and the bank came up short of the total amount on the mortgage note. In these states, the bank has to take the loss in the amount loaned to the borrower to get the home vs. the amount the home was purchased for in a foreclosure sale.

Generally though, the borrower will be liable for a deficiency in the price the home was sold for vs. the amount of the mortgage. The success of a bank getting an executed deficiency judgment against the former homeowner is a different story.

While the judgment will leave a negative rating on a borrower's credit report and could be described as akin to kicking someone when (s)he is down since the foreclosure and delinquent mortgage payments will already mess up the borrower's credit, the bank will not be able to collect the judgment if the borrower is insolvent. Therefore, the borrower will be liable but that might not change the deficiency's status.