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 North Dakota, 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. North Dakota law, specifically North Dakota Century Code Section 32-19-06, limits the time frame in which a lender can pursue a deficiency judgment to 90 days after the foreclosure sale. Additionally, the amount of the deficiency judgment may be limited by the fair market value of the property. If the foreclosure sale price is less than the fair market value, the deficiency judgment must be calculated based on the fair market value, not the sale price. Borrowers should be aware that lenders have the right to pursue this legal action to recover the deficiency balance, and it is advisable to consult with an attorney to understand the full implications and potential defenses available.