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 Alabama, if a property is foreclosed upon and the sale does not generate enough funds to cover the outstanding mortgage balance, the lender may have the right to seek a deficiency judgment against the borrower for the remaining amount owed. This is known as a deficiency balance or mortgage deficiency. Alabama is a recourse state, which means that lenders have the option to pursue this deficiency balance after the foreclosure sale. The process for seeking a deficiency judgment in Alabama typically involves the lender filing a lawsuit against the borrower after the foreclosure sale has been completed. The borrower then has the opportunity to contest the deficiency amount or the validity of the claim. The specific rights and obligations regarding deficiency balances can be influenced by the terms of the mortgage agreement and any applicable state laws that may provide certain protections for borrowers. It is advisable for individuals facing potential deficiency judgments to consult with an attorney to understand their legal options and any defenses they may have.