What situation is typically associated with a deficiency judgment?

What situation is typically associated with a deficiency judgment?

• A. The property sells for more than the loan amount
• B. The borrower fails to make any payments
• C. The foreclosure sale amount is insufficient to cover the loan
• D. The borrower pays off the loan early

Answer: (C)

A deficiency judgment arises when the proceeds from a foreclosure sale are not sufficient to cover the total outstanding amount of the loan. This judgment allows the lender to seek recovery of the remaining balance from the borrower. In scenarios where the property sells for less than the amount owed on the mortgage, the lender may pursue a deficiency judgment against the borrower for the difference. In contrast, if a property sells for more than the loan amount, there would be no deficiency, and therefore no judgment would be necessary. Similarly, if a borrower fails to make any payments, the property would likely be foreclosed upon, but a deficiency judgment specifically pertains to the shortfall after the sale. In the case of early repayment or payoff of the loan, the borrower would settle the debt in full prior to any foreclosure scenario, eliminating the possibility of a deficiency judgment entirely.

A deficiency judgment arises when the proceeds from a foreclosure sale are not sufficient to cover the total outstanding amount of the loan. This judgment allows the lender to seek recovery of the remaining balance from the borrower. In scenarios where the property sells for less than the amount owed on the mortgage, the lender may pursue a deficiency judgment against the borrower for the difference.

In contrast, if a property sells for more than the loan amount, there would be no deficiency, and therefore no judgment would be necessary. Similarly, if a borrower fails to make any payments, the property would likely be foreclosed upon, but a deficiency judgment specifically pertains to the shortfall after the sale. In the case of early repayment or payoff of the loan, the borrower would settle the debt in full prior to any foreclosure scenario, eliminating the possibility of a deficiency judgment entirely.