When you are in a state of default on your mortgage and your lender is pursuing foreclosure as a means of recovering the debt that is owed, the lending company may also file for a deficiency judgment if the value of the property being foreclosed on is substantially less than the amount owed on the property. For instance, if you owe $230,000 on your mortgage and the property is only valued at $180,000, through a deficiency judgment you would be held responsible for the remaining $50,000. So, what are the deficiency judgments Pennsylvania rules and is this permitted in PA?
Are Deficiency Judgments an Option in Pennsylvania?
Yes, lenders can seek a deficiency judgment after a foreclosure in PA. As long as the property which was foreclosed on was sold publicly and for less than the total amount of the remaining loan balance from the original homeowner’s mortgage, a lender has the legal option to pursue recovery through the means of a deficiency judgment. Upon the successful issuing of this judgment, the original homeowner will be responsible for satisfying the remaining loan amount with the lender, as long as the action of the judgment is brought to the borrower within 6 months of the public sale of the foreclosed property.
Typical Costs of a Deficiency Judgment
If a lender wins a deficiency judgment against a borrower, the borrower is held legally and financially responsible for many costs on top of the amount of the delinquency in the loan.
- Most courts will allow the lender to charge the borrower for the costs of filing the petition for the judgment and all accompanying court costs, plus all of the court costs that the original foreclosure entailed.
- In many states, the lender will be allowed the legal right to seize property and even garnish wages in order to recover the cost of any amount sought in a deficiency judgment.
Are Deficiency Judgments Common?
Although in many states across the U.S. the lender is entitled to pursue fund recovery through a deficiency judgment, it is never a guarantee that the lender will exercise this right. It depends squarely on the particular lender and the amount of the balance that will be left over after the property being foreclosed on sells. A lender typically has a period of 6 months from the date of the foreclosure to exercise this right, but in most cases a lender does not wish to spend the time, resources, or initial costs of court proceedings to acquire funds from a borrower who obviously doesn’t have them. If the borrower had this money to pay, he likely wouldn’t have been foreclosed on. There are different kinds of loans and mortgages as well, some of which do not offer deficiency judgment as an option. One of these types of mortgages are usually referred to as “non-recourse” loans.
Getting Help
To avoid the risk of a deficiency judgment, you should speak with a qualified foreclosure attorney as soon as possible when you begin having trouble making your mortgage payments. Your attorney can help you to work with your lender and to explore alternatives to foreclosure that may be more cost effective and better for both you and your lender.
