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 Delaware, 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. Delaware law permits lenders to file a lawsuit to obtain a deficiency judgment within a certain time frame after the foreclosure sale. However, the pursuit of a deficiency balance is subject to specific procedural requirements, and the amount that can be claimed may be limited by the fair market value of the property. Borrowers facing foreclosure should consult with an attorney to understand their rights and any potential liability for a deficiency balance under Delaware law.