In any state, a deficiency judgment occurs when a lender seeks recourse from the courts to collect any amount left unpaid on an outstanding mortgage or home loan agreement, which is not satisfied via judicial or non-judicial sale. State laws widely vary on the specific homeowners exempt from this process, and when exactly a lender can commence deficiency action. However, in the state of North Carolina, the laws governing foreclosure and ensuing deficiency judgments are covered in the North Carolina General Statutes, Chapter 45.
How North Carolina Treats Deficiency Judgments in Foreclosure Sales
Following a foreclosure sale, a lender is afforded the right to collect a deficiency judgment against a borrower following a foreclosure sale. For borrowers, however, the deficiency judgment lien is calculated based on the fair market value of a property sold via foreclosure, rather than the actual foreclosure auction price of the property. What this is means is that if a homeowner’s property, which secures a home loan, has a fair market appraisal value less than the total amount owed on a given home loan, the borrower will be subject to a deficiency judgment, if a lender chooses to pursue the matter.
It is also notable to mention that second mortgages, or any other subsequent junior liens on a property, most likely can only collect a deficiency judgment in the state of North Carolina. Furthermore, unless otherwise directly prevented in the foreclosure prevention contract, a homeowner can also be subject to deficiency judgments following a short sale or deed in lieu of foreclosure agreement.
Getting Legal Help with Deficiency Judgments in North Carolina
For individual homeowners facing the possibility of foreclosure, the first person to consult after speaking with one’s home loan lender is a foreclosure lawyer actively practicing in the state of North Carolina. In light of the case-specific elements relevant to each case, a homeowner may or may not be subject to a deficiency judgment in the state of North Carolina, while in certain cases, it is simply not practical for a lender to seek recovery of a delinquency amount. Furthermore, it is notable that certain foreclosure prevention actions, such as short sales and deed in lieu of foreclosure deals, create borrower liability for deficiency judgments in certain cases. In order to prevent this from occurring, possibly prevent foreclosure in general, and mitigate the overall risks associated with foreclosure, a borrower should consult with a foreclosure lawyer in the state of North Carolina as soon as a home loan appears to be facing default.
