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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 Alaska, 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. Alaska Statute 09.35.250 allows lenders to pursue deficiency judgments following both non-judicial and judicial foreclosures. However, there are certain limitations. For example, if the foreclosure is non-judicial and the property is less than 102 acres, the lender must record a notice of default and provide the borrower with the opportunity to cure the default before proceeding. Additionally, Alaska Statute 34.20.100 limits the time frame in which a lender can seek a deficiency judgment to within 12 months after the foreclosure sale. Borrowers should be aware that the terms of their mortgage agreement and state laws will affect their liability for any deficiency balance after foreclosure.

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Real property

deficiency balance on foreclosure

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Alaska State Code

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Real property

deficiency balance on foreclosure

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