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 Arizona, the laws regarding deficiency balances following foreclosure are governed by the state's anti-deficiency statutes. Under Arizona law, lenders may not always be able to pursue a deficiency judgment against borrowers following the foreclosure of a residential property. Specifically, Arizona's anti-deficiency protections apply to properties that are 2.5 acres or less and utilized as a single one-family or single two-family dwelling. If the foreclosed property meets these criteria, the lender may not be able to obtain a deficiency judgment against the borrower after a trustee's sale. However, if the property does not meet these criteria, or if the mortgage is a 'non-purchase money' mortgage (not used to purchase the property), the lender may still pursue a deficiency judgment. The pursuit of a deficiency balance must occur within a certain time frame after the foreclosure sale, typically 90 days. It's important for borrowers facing foreclosure in Arizona to consult with an attorney to understand their rights and obligations under the state's anti-deficiency laws.