If a lender holds a deficiency due to foreclosure, what is their right concerning that deficiency?

When a lender holds a deficiency due to foreclosure, they have the right to pursue a deficiency judgment against the borrower. This situation arises when the sale of the foreclosed property does not cover the outstanding balance on the mortgage loan, leaving the borrower with a remaining debt. In this context, a deficiency judgment allows the lender to seek the difference between what was owed and what was recovered from the foreclosure sale.

The legal basis for a deficiency judgment varies by state, but in general, lenders can take this course of action to recoup their financial losses. Obtaining a judgment allows the lender to pursue other means of collection, such as garnishing wages or placing liens on other properties owned by the borrower.

Understanding this right is critical for borrowers facing foreclosure, as it can have significant implications for their financial future following a foreclosure event. The other options presented do not reflect the legal actions available to lenders regarding deficiencies after a foreclosure, emphasizing the entitlement of lenders to seek compensation beyond the property itself.