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 Louisiana, when 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 pursue a deficiency judgment against the borrower for the remaining balance, known as a deficiency balance. Louisiana law allows lenders to seek deficiency judgments following both judicial and non-judicial foreclosures. However, the specific rights and limitations are governed by the terms of the mortgage contract and the applicable state statutes. For instance, the lender must adhere to certain procedural requirements, such as timely filing the deficiency action after the foreclosure sale. Borrowers should be aware that Louisiana's laws regarding the pursuit of deficiency balances can be complex, and it may be beneficial to consult with an attorney to understand their rights and obligations under the law.