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 Massachusetts, if a property is foreclosed upon and the sale does not cover the outstanding mortgage balance, the lender may seek a deficiency judgment against the borrower for the remaining amount, known as a deficiency balance. Massachusetts General Laws Chapter 244, Section 17B limits the time frame in which a lender can seek a deficiency judgment to two years after the foreclosure sale. Additionally, the lender must comply with certain notice requirements and procedures to preserve the right to seek a deficiency judgment. It is important for borrowers facing foreclosure to understand that they may still be liable for a deficiency balance even after the property is sold at foreclosure, and they should consult with an attorney to understand their rights and obligations under Massachusetts law.