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 Illinois, if a property is foreclosed 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. Illinois is a judicial foreclosure state, meaning that the lender must go through the court system to foreclose on a property. After the foreclosure sale, if there is a deficiency, the lender has the right to file a lawsuit against the borrower to recover the deficiency balance. However, the borrower has certain protections and rights under Illinois law, such as the right to receive notice of the foreclosure and the right to redeem the property before the sale. The lender's ability to pursue a deficiency judgment may also be affected by the terms of the mortgage agreement and any applicable state laws that limit or prohibit such actions. It's important for borrowers facing foreclosure in Illinois to consult with an attorney to understand their rights and obligations regarding any potential deficiency balance.