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 Connecticut, if a property is foreclosed and the sale does not 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. Connecticut law allows lenders to pursue deficiency judgments following a foreclosure sale, but there are specific procedures and time limits they must follow. The lender must file a motion for a deficiency judgment within 30 days after the title passes or the court confirms the sale, whichever is later. The court will then determine the fair market value of the property and compare it to the debt owed. If the property's fair market value is less than the debt, the court may issue a deficiency judgment for the difference. Borrowers should be aware that they may be responsible for this amount and may want to consult with an attorney to understand their rights and any potential defenses they may have.