When a home is being foreclosed upon in Connecticut, the home is typically sold by the lender in a foreclosure sale. Ideally, the sale will yield enough money to cover the outstanding loan on the property. However, in reality a foreclosure sale will usually garner a sale price well below market value.
In this situation, the lender may opt to file a deficiency judgment against the homeowner/borrower to make up the difference.
What is a Deficiency Judgment?
A deficiency judgment is a money judgment sought by a lender when the foreclosure sale on a borrower's home was unable to recoup the entire outstanding balance on the mortgage securing the property.
The availability of a deficiency judgment depends on the type of mortgage the lender has with the borrower as well as the amount of money obtained in the foreclosure sale. A lender can only pursue this action if there is a deficiency in the full payment of the mortgage.
Deficiency Judgments in Connecticut
Connecticut is a lien theory state. This means that property is treated as security to the underlying mortgage loan. However, in Connecticut the mortgage paperwork has the same legal effect as a deed of trust. This means that the lender has legal title to the property while the borrower has equitable title, or the equity of redemption.
Connecticut does not have the option of a non-judicial foreclosure. Only judicial foreclosure proceedings are available. However, there are two types of foreclosures in Connecticut:
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Strict Foreclosure: a summary proceeding where the lender obtains title directly from the court without a foreclosure sale; this is more common for properties with little or no equity
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Foreclosure by Sale: the property is sold as part of a public sale & the court must issue a final judgment of foreclosure
Pursuit of deficiency judgments: Connecticut. Yes, as long as the motion for judgment is brought up to 30 days after the redemption period has expired. It does not matter which type of foreclosure took place on the property.
A lender must file very quickly to pursue a deficiency judgment.
Getting Legal Counsel
Connecticut borrowers should consider this article only as a general guide, not a substitute for the personal advice and guidance of a licensed Connecticut foreclosure attorney. A Connecticut foreclosure attorney can give personalized advice for your particular situation and has more familiarity with the laws and judicial procedures than an unrepresented party.
