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 Florida, if a property is foreclosed on 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. Florida Statutes provide a framework for seeking deficiency judgments in the context of foreclosures. Specifically, lenders must file a separate lawsuit to obtain a deficiency judgment within one year after the foreclosure sale or the court's issuance of a certificate of title. The amount of the deficiency judgment may be the difference between the judgment amount (with costs and fees) and the fair market value of the property at the time of sale, rather than the actual sale price. However, the court has discretion to determine the appropriate amount of the deficiency, if any, based on equitable principles. Borrowers should be aware that if the court awards a deficiency judgment to the lender, the lender can then pursue collection of that amount from the borrower.