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 Washington State, after a foreclosure sale, if the proceeds are insufficient to cover the mortgage debt, the lender may have the right to seek a deficiency judgment against the borrower for the remaining balance, known as a deficiency balance. However, Washington law provides certain protections for borrowers. Under RCW 61.24.100, deficiency judgments are generally not allowed after a nonjudicial foreclosure of owner-occupied residential property. This means that if the property was the borrower's primary residence and the foreclosure was conducted outside of the court system, the lender typically cannot pursue the borrower for any remaining debt. However, for commercial properties, investment properties, or in cases where the foreclosure was judicial (processed through the courts), lenders may still pursue deficiency judgments. The specific circumstances of the foreclosure and the type of property involved will determine the lender's ability to seek a deficiency balance. Borrowers facing foreclosure should consult with an attorney to understand their rights and obligations under Washington law.