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 California, the ability of a lender to pursue a deficiency balance following a foreclosure is significantly restricted. Under California's anti-deficiency laws, lenders are generally prohibited from obtaining a deficiency judgment against the borrower after a non-judicial foreclosure, which is the most common type of foreclosure in the state. This means that if the proceeds from the foreclosure sale are not enough to cover the outstanding mortgage balance, the lender typically cannot go after the borrower for the remaining amount. However, there are exceptions to this rule, such as when the loan is not a purchase money loan (a loan used to buy the property), or when the foreclosure is judicial, which is less common. Additionally, if the borrower refinanced the original purchase money loan and took cash out, the lender may be able to pursue a deficiency for the cash-out portion. It's important for borrowers facing foreclosure to understand their rights and obligations under California law and to consult with an attorney for advice specific to their situation.