While Missouri is thirtieth in the nation in foreclosure rates, the deficiency judgments Missouri files are the lowest. Missouri is an anti-deficiency law state, which means that, generally, deficiency judgments are not allowed except in rare types of transactions. A deficiency judgment occurs when a lender sues a borrower for the difference between what their foreclosed property sells for at auction and the balance on their mortgage loan. For a homeowner already finding it difficult to pay their bills, additional judgments in the tens of thousands to hundreds of thousands of dollars may be impossible. In Missouri, the vast majority of homeowners in foreclosure do not have that concern.
Missouri Mortgage Defaults
When a homeowner in Missouri defaults on their mortgage, their lender can foreclose, even after just one missed payment. Most lenders wait several months before beginning the foreclosure process, however, since they have more foreclosed properties on their books than they can handle now. For most lenders, they have the opportunity to file non-judicial foreclosure because those mortgages include a power of sale provision allowing a trustee to sell the property at auction. In those mortgages without a power of sale clause, the lender can still pursue a judicial foreclosure; however, non-judicial foreclosures are far more common.
In many states, if the property is sold at auction for less than the homeowner owes, they may face a deficiency judgment. The lender may file suit to reclaim the difference between those two amounts. Missouri allows no such actions, in foreclosure proceedings or in short sales and deed in lieu of foreclosure transfers.
Short sales are another solution for homeowners who default on their mortgage. If the homeowner receives an offer to sell their home for less than the mortgage amount owed, they may be able to come to an agreement with the lender to accept that amount as payment in full. While in some states, the lender may seek a deficiency judgment for the difference, that too is prohibited in Missouri.
Another alternative to foreclosure is a deed in lieu of foreclosure. Some lenders may accept a direct transfer of the deed to the property in place of a foreclosure. This is not as common today as it once was because most lenders already have many foreclosure properties to attempt to sell or manage and many do not want to add more. However, in Missouri, because the lender is prohibited from seeking a deficiency judgment in this kind of transfer, it can be an attractive option for homeowners.
Getting Legal Help with Missouri Deficiency Judgments
In the rare foreclosure in Missouri that a deficiency judgment may be granted, a homeowner should consult a foreclosure attorney to help them find the best way to respond to that judgment and attempt to save their financial future. For the most part, Missouri homeowners may focus on the saving their home or finding alternatives to foreclosure rather than avoiding deficiency judgments, and foreclosure attorneys have the experience to provide the kind of guidance they need.
