Anti Deficiency Laws

Some states have anti-deficiency laws. These are laws that protect purchasers of residential real property used for his/her primary residence pursuant to a purchase money mortgage. In the event that the purchaser fails to make the mortgage payment and the property is foreclosed and sold to pay the mortgage, a deficiency between the sale price and the outstanding balance of the mortgage could occur. Under anti-deficiency laws, the purchaser will not be held responsible for any deficiency the lender can only recover the property and the proceeds of a subsequent sale; the purchaser does not pay any deficit between the sale proceeds and the outstanding loan balance.

What the Lender Can Recover

The lender can only recover the property and the proceeds of a subsequent sale. The purchaser does not pay any deficit between the sale proceeds and the outstanding loan balance. This allows the purchaser to walk away from a property without owing a deficiency judgment amount. Anti-deficiency laws typically provide no protection for second mortgages or home equity lines. Also, there is no protection when the property is not used as the primary residence of the purchaser.

• If you are in the process of Foreclosure or maybe facing Foreclosure soon, Consult Your Case for Free with a local certified Foreclosure Attorney to see which legal options you have available.

Anti-Deficiency Laws

While anti-deficiency laws can protect a homeowner in some cases, the majority of Americans have recently obtained two loans in the purchase of homes, often referred to as a "piggy-back mortgage." The first mortgage would have been for 80 % of the purchase price with all or a portion of the balance of the purchase price obtained by means of a home equity line of credit or second mortgage. If the first loan is foreclosed and the amount of the sale is enough to only pay off the first lender, the second lender will be entitled to sue the owner for the value of its loan. Many anti-deficiency laws won’t protect the homeowner for amount owed on the second loan.

State Foreclosure Deficiency Laws

• ALABAMA: Deficiency judgments are allowed in Alabama, if property in foreclosure is properly auctioned to the public via power of sale or judicial sale and nets less than the loan amount that the mortgage secures.
• ALASKA: Alaska has a broad form of anti-deficiency statute that precludes a deficiency judgment following the completion of a no judicial foreclosure.
• ARIZONA: Arizona's anti-deficiency statutes prevent a lender from suing a person for any losses on a home after foreclosure.
• ARKANSAS: Lenders are allowed to obtain deficiency judgments in Arkansas, but the amount of the deficiency judgment must be the total amount of the lien minus the fair market value of the foreclosed properly.
• CALIFORNIA: California's anti-deficiency law applies only to funds used to purchase a residence. The anti-deficiency law does not apply to additional financing such as second mortgages or home-equity loans.
• COLORADO: Deficiency judgments are allowed in the state of Colorado; however, the homeowner may contest an unfavorable difference in the bid price and the fair market value of the foreclosed property.
• CONNECTICUT: In Connecticut, deficiency judgments are covered in §49-14 General Statutes of Connecticut, which allow deficiency judgment when applicable and following an application, appraisal process, and hearing.
• DELEWARE: In Delaware, if foreclosed property is sold at public auction and the sale garners less than the original amount of the loan, a deficiency judgment can be made.
• FLORIDA: In Florida, mortgages must be foreclosed by filing a lawsuit in court. Florida is unusual in that the state has passed few statues regulating foreclosures.
• GEORGIA: Deficiency judgments are permitted in Georgia, however, anti-deficiency laws mandate that the foreclosed property sale be final, and the lender has a finite period of thirty days following the foreclosure sale to seek a deficiency judgment.
• HAWAII: There are no anti-deficiency statutes to protect individuals in Hawaii, and if applicable, lenders may seek the difference between the sale of the foreclosed property and the outstanding loan obligations.
• IDAHO: In the state of Idaho, lenders may seek deficiency judgments and associated costs and filing fees, if they commence deficiency actions within ninety (90) of the foreclosure sale date and adjust sale prices to fair market value.
• ILLINOIS: In the state of Illinois, anti-deficiency laws prohibit deficiency judgments in the case of deed in lieu of foreclosure and consent foreclosure.
• INDIANA: In the state of Indiana, deficiency judgments can be sought by lenders seeking to close the gap between the foreclosure sale price of a property and the outstanding loan amount secured by the mortgage.
• IOWA: Per Iowa Code Chapter 654.6, lenders may seek deficiency judgments against foreclosed homeowners. In the state of Iowa, the lender may elect to waive deficiency to make the redemption period briefer.
• KANSAS: In the state of Kansas, homeowners facing judicial or non-judicial sale also face deficiency judgments to cover the amount of the original loan amount less the foreclosure sale of their property.
• KENTUCKY: In the state of Kentucky, deficiency judgments can be obtained, however, they are only allowed when the mortgage holder was served their foreclosure complaint in person or was served and did not file an answer.
• LOUISIANA: In the state of Louisiana, a deficiency judgment may be obtained by lenders if the amount of the foreclosure fails to cover the amount of the loan collateralized by the mortgage. However, the deficiency judgment can only be obtained through the ordinary process or separate suit outside of the executor process.
• MAINE: In the state of Maine, individuals can be subject to deficiency judgments, if applicable. However, judgments can only be made based on the fair market value of the foreclosed property.
• MARYLAND: In the state of Maryland, borrowers are subject to deficiency judgments if the foreclosure sale of their property does not cover the outstanding debts secured by the mortgage.
• MASSACHUSETTS: A proper sale prevents the borrower from exercising any right to reclaim the property through redemption. If the foreclosure sale proceeds are not enough to pay off the lender, then the borrower is liable for the deficiency.
• MICHIGAN: In the state of Michigan, anti-deficiency statutes allow homeowners to contest the fair market value assessed to the foreclosed property, as well as requiring some separate legal document, such as a note and guaranty, obligating individuals to a set dollar amount.
• MINNESOTA: In the state of Minnesota, deficiency judgments are restricted to the fair market value of a foreclosed property less the unpaid balance of the foreclosed loan.
• MISSISSIPPI: Per sections §15-1-19 and §15-1-21of the Mississippi law code, lenders can seek deficiency awards against individuals for the remaining balance of unpaid mortgages less the foreclosure sale price of a given property.
• MISSOURI: In the state of Missouri, lenders are typically not afforded the right to seek deficiency judgments against mortgage holders, whose foreclosure sale amount failed to cover outstanding loan amounts.
• MONTANA: In the state of Montana, anti-deficiency laws prohibit lenders from assessing deficiency judgments against individuals following the non-judicial sale of their foreclosed property.
• NEBRASKA: In the state of Nebraska, deficiency actions must be made by lenders within ninety (90) days of the foreclosure sale, and the judgment amount is tabulated as the original value of the loan, plus costs and filing fees, minus the fair market value of the home or real estate.
• NEVADA: In the state of Nevada, lenders may assess deficiency judgments against individuals in foreclosure, but must file their intentions to seek a deficiency judgment within ninety (90) days of the foreclosure sale.
• NEW HAMPSHIRE: Deficiency judgments may be obtained by lenders in the state of New Hampshire, which allows them to collect the amount that the foreclosure sale failed to cover of the original loan amount.
• NEW JERSEY: In the state of New Jersey, a deficiency judgment can be sought by lenders within three (3) following a public foreclosure sale. Borrowers will now be responsible for the monetary difference between the amount of the original loan and the sale amount of the foreclosure sale. Anti-deficiency laws mandate homeowners must actively request the fair market value of the property to be used rather than the terms of the foreclosure sale.
• NEW MEXICO: In the state of New Mexico, an anti-deficiency statute explicitly prohibits the assessment of deficiency judgments against individuals involved in non-judicial foreclosure sale related to low income real estate.
• NEW YORK: In the state of New York, plaintiffs may file for deficiency judgments from defendants in the event that a foreclosure sale failed to compensate for the outstanding original loan obligations.
• NORTH CAROLINA: In the state of North Carolina, Chapter 45, Article 2B §45-21.36 details that mortgagors are subject to deficiency liens if applicable, however, mortgagors have the right to prove fair market value of a property versus the outstanding foreclosure sale amount.
• NORTH DAKOTA: The lender may not ask for a deficiency in the foreclosure suit if it has already brought another suit just to collect on the loan. Any cash surplus from the sale, beyond that needed to pay off the mortgage and the foreclosure costs must be paid to the borrower.
• OHIO: In the state of Ohio, a deficiency judgment can be assessed to borrowers, whose foreclosure sale amount fails to rectify outstanding obligations to their lender. However, there is a two (2) year statute of limitations on enforcing deficiency judgments, unless a borrower waives this right in writing.
• OKLAHOMA: Oklahoma’s anti-deficiency laws limit deficiency judgments to those calculating the fair market value into the deficiency lien and do not allow power of sale. Homeowners are legally allowed to contest deficiency judgments.
• OREGON: A deficiency judgment cannot be obtained through a non-judicial deed of trust foreclosure by advertisement.
• PENNSYLVANIA: In the state of Pennsylvania, deficiency actions taken against borrowers following a foreclosure sale must occur within six months of that foreclosure sale.
• RHODE ISLAND: In the state of Rhode Island, there are little to no anti-deficiency laws to protect foreclosed property owners, and if the foreclosure sale amount fails to cover the original loan amount, lenders can enforce deficiency judgments.
• SOUTH CAROLINA: Deficiency judgments are permitted.
• SOUTH DAKOTA: In the state of South Dakota, deficiency judgments are enforceable for all foreclosure sales failing to meet borrower’s original obligation of a mortgage loan, however, the value of the foreclosure sale must be assessed at fair market value when determining the deficiency judgment amount.
• TENNESSEE: In the state of Tennessee, deficiency liens are permissible against borrowers who fail to meet their financial obligations to a lender, even with the foreclosure sale of their property in foreclosure.
• TEXAS: Deficiency judgments can only be for the difference between FAIR MARKET VALUE and the balance owed on the loan. There is no right of redemption.
• UTAH: Deficiency judgments can be obtained by lenders in the state of Utah, if a property in foreclosure is publicly sold for an amount less than the underlying deed of trust or mortgages secures.
• VERMONT: Deficiency judgments are permitted in Vermont, which allows a lender to collect from the borrower any funds not repaid via a foreclosure sale of their property.
• VIRGINIA: In the state of Virginia, creditors may request a deficiency lien on consumers for the outstanding balance left over from the original loan amount minus the amount of the public foreclosure sale of a property.
• WASHINGTON: In the state of Washington, anti-deficiency laws prohibit the assessment of deficiency judgments against individuals involved in non-judicial foreclosure. To obtain a deficiency lien in the case of judicial foreclosure sales, a property must have been occupied to the preceding six months before a foreclosure judgment was issued.
• WEST VIRGINA: In the state of West Virginia, anti-deficiency laws prevent any deficiency judgment against borrowers following the public sale of property used to secure loan amount in default.
• WISCONSIN: In the state of Wisconsin, to obtain a deficiency judgment, creditors must assess a fair market value of a property minus the existing original loan amount to determine the amount of the deficiency judgment.
• WYOMING: There are currently no anti-deficiency laws in the state of Wyoming protecting homeowners in foreclosure from being assessed an additional lien for the amount of money that their foreclosure sale did not produce in comparison to the original loan amount.
  
  

If you are in the process of Foreclosure or maybe facing Foreclosure soon, Consult Your Case for Free with a local certified Foreclosure Attorney to see which legal options you have available.