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 Missouri, 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 pursuing a deficiency balance or mortgage deficiency. Missouri law allows for deficiency judgments following both judicial and non-judicial foreclosures. However, the pursuit of a deficiency judgment must follow specific procedures and timelines. For instance, after a non-judicial foreclosure sale, the lender has to file a lawsuit to obtain a deficiency judgment within one year. The amount of the deficiency is determined by the difference between the total debt owed and the fair market value of the property at the time of the sale, or the foreclosure sale price, whichever is greater. Borrowers should be aware that lenders may not always pursue a deficiency judgment, and it can depend on various factors, including the terms of the mortgage agreement and the lender's assessment of the borrower's ability to repay the deficiency.