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 Utah, 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. Utah law permits lenders to file a lawsuit to obtain a deficiency judgment within three months after the foreclosure sale. However, the amount of the deficiency judgment may be limited by the fair market value of the property. Specifically, the deficiency is calculated as the difference between the total debt owed and the greater of the sale price at foreclosure or the fair market value of the property. Borrowers should be aware that if the foreclosure is nonjudicial (without court action), the right to pursue a deficiency judgment may be waived unless the right is expressly reserved in the deed of trust. It is important for borrowers facing foreclosure in Utah to understand their rights and potential liabilities regarding deficiency balances, and they may want to consult with an attorney for guidance specific to their situation.