Can a lender pursue a deficiency judgment in a foreclosure?

In California, a lender may pursue a deficiency judgment in some cases of foreclosure. A deficiency judgment is a court order for the borrower to pay the difference between the balance of their loan and the amount the property sold for at the foreclosure sale. Generally, a lender may pursue a deficiency judgment if the mortgage was secured by a single-family home owner’s residence. The lender must wait at least six months after the foreclosure sale before filing an action for a deficiency judgement. The borrower has the right to raise any number of defenses in order to block the lender’s pursuit of a deficiency judgment. These defenses include impossibility of performance, release of debt, payment, novation, accord and satisfaction, and innocence of the debt. The defenses must be raised by the borrower and proven in court. If the lender successfully obtains a deficiency judgment from the court, the borrower will be liable for the remaining balance of their loan. This debt is usually collectible for up to 10 years after the judgement is issued, so it can be important for borrowers to try to settle the debt before the judgement is made. It is important for borrowers to know their rights before entering a foreclosure process. Seeking legal advice can be helpful in understanding the potential consequences of a foreclosure, including the possibility of a lender pursuing a deficiency judgment.

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