A deficiency balance on foreclosure—also known as a mortgage deficiency or deficiency balance—occurs when a home or property is foreclosed on and the sale proceeds are not sufficient to pay off the mortgage. The remaining balance owed on the mortgage is a deficiency balance or mortgage deficiency.
Laws vary from state to state and a state’s laws and the terms of the mortgage may determine whether the mortgage lender (bank or mortgagee) will pursue a mortgagor who defaulted on a mortgage for any deficiency balance.
In Arkansas, if a property is foreclosed upon and the sale does not generate enough funds to cover the outstanding mortgage balance, the lender may seek a deficiency judgment against the borrower for the remaining amount. This is known as a deficiency balance or mortgage deficiency. Arkansas law permits lenders to pursue deficiency judgments following both judicial and non-judicial foreclosures. However, the process and the borrower's liability can be influenced by factors such as the type of foreclosure process used, the terms of the mortgage contract, and any applicable redemption periods. Borrowers should be aware that there may be a limited time frame in which a lender must file for a deficiency judgment after the foreclosure sale. It is advisable for individuals facing potential deficiency judgments to consult with an attorney to understand their rights and obligations under Arkansas law.