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 Nebraska, if a foreclosed property is sold and the sale proceeds do not cover the outstanding mortgage balance, the lender may seek a deficiency judgment against the borrower for the remaining balance, known as a deficiency balance. Nebraska law allows lenders to pursue deficiency judgments following both judicial and non-judicial foreclosures. However, there are certain limitations and procedures that must be followed. For instance, after a judicial foreclosure sale, the lender must file a motion for a deficiency judgment within three months of the sale. Additionally, the amount of the deficiency judgment may be limited to the difference between the fair market value of the property at the time of the sale and the outstanding mortgage debt. Borrowers should be aware that if they face a potential deficiency judgment, they may have legal defenses or may be able to negotiate with the lender. Consulting with an attorney can provide guidance on the specific options and protections available under Nebraska law.