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Real property

deficiency balance on foreclosure

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 Ohio, 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. Ohio law permits lenders to file a lawsuit to obtain a deficiency judgment within two years after the confirmation of the foreclosure sale. However, the borrower has the right to contest the deficiency amount and present evidence that the property was sold for less than its fair market value. If the court finds that the sale price was indeed less than the fair market value, the deficiency judgment may be reduced accordingly. Borrowers should be aware that if a deficiency judgment is granted, the lender can take legal action to collect the debt, which may include garnishing wages or bank accounts.

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Real property

deficiency balance on foreclosure

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Real property

deficiency balance on foreclosure

Articles