In the final stages of a typical foreclosure action in Alaska, the lender sells the property in a foreclosure sale of some type in hopes that it will be able to recoup some of the outstanding balance due on the property. Oftentimes though, the sale will not produce enough money to pay off the full balance.
In this scenario, the lender may decide to file a deficiency judgment against the homeowner for the difference.
What is a Deficiency Judgment?
A deficiency judgment is an unsecured money judgment against the homeowner/borrower filed by the lender to recover this deficiency in the results of the foreclosure sale vs. the remaining balance on the loan held by the homeowner/borrower.
Getting Protection from Deficiency Judgments in Alaska
Protection from deficiency judgments: Alaska. It depends on what type of loan the lender has given to the borrower as well as the parameters of the loan.
Alaska law evaluates real property ownership under the title theory, where the property title is held in trust until the full loan balance is paid. Under this theory, foreclosure is a non-judicial remedy. The document that secures title to the property is referred to as a trust deed.
A lender can choose to pursue a judicial foreclosure but those take more time than the non-judicial foreclosures, where lenders typically use the power of sale provisions in deeds of trust.
Alaska Statute §100, Title 34, Chapter 20 forbids a lender from obtaining a deficiency judgment against a homeowner/borrower where the property in foreclosure is sold at a public sale for a lesser amount than the outstanding balance. The only way a lender can pursue a deficiency judgment against a borrower is to create a judicial action under the note only.
This means that since foreclosure is not a judicial remedy under Alaska law, a lender will have to either pursue a longer foreclosure period or risk not selling the property for enough money in a non-judicial foreclosure and give up the option to later pursue a deficiency judgment.
Getting Legal Counsel
A borrower should seek out a qualified Alaska foreclosure attorney for more information on deficiency judgments and if there is a possibility that he or she may be sued by the lender to recover money on an outstanding loan. The attorney will be able to provide specific information to a borrower and be invaluable in helping a borrower reach a more favorable outcome if possible.
