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 New Mexico, 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. New Mexico is a judicial foreclosure state, meaning that lenders must go through the court system to foreclose on a property. After the foreclosure sale, the lender has the right to file a lawsuit to obtain a deficiency judgment within six months of the sale. However, for residential properties of less than 2.5 acres and occupied by the owner, the Anti-Deficiency Protection applies, and the lender may not pursue a deficiency judgment if the loan was a purchase money mortgage, which is a loan used to buy the property. It's important for borrowers facing foreclosure in New Mexico to understand their rights and obligations under state law and to consult with an attorney for guidance specific to their situation.