Foreclosure deficiency accrues when the lender is unable to cover all that is owed to them in the mortgage by the debtors from the foreclosure sale proceeds. This deficiency can also be attributed to a short sale or from a deed in lieu of foreclosure in Massachusetts.

How it works

Foreclosure deficiency is the difference between the sale proceeds and the total debts. It is a common scenario when most lenders forecloseon mortgages. The worst nightmare for debtors is that in this case they do not only lose their property but also that the lenders can seek a separate personal judgment against them in the pursuit of collecting this deficiency by obtaining a deficiency judgment and after successfully obtaining it, use wage garnishment or freeze the debtor’s account among others in order to collect this amount.

Deficiency judgment

Most foreclosures in Massachusetts are non-judicial which implies that that the lender needs not to go to the state court to acquire this judgment.However judicial foreclosures are also allowed and the deficiency judgment is obtained separately as long as the lender sends a written notice to you at least 21days before the foreclosure sale (Mass. Gen. Laws Ch .244, & 17B). The statute limitation is that the lender must bring the deficiency lawsuit within two years after the foreclosure sale (Mass. Gen. Laws Ch .244, & 17A)

Who else can come after you?

When a lien holder forecloses, any other junior liens lose their security interest on the property once it has been foreclosed.They can sue you personallyon the promissory note so as to collect their balance of the loans.Which means that your equity did not cover the second and third mortgages.

Deficiency after a short sale in Massachusetts

A short sale is where you personally sell the property for less than the total debt you owe from your mortgage payments and the proceeds.This sales are to be used to clear off a significant portion of the mortgage debt. A lender can seek a deficiency ruling following a short sale and for you to avoid this eventuality ensure that your short sale arrangement with your lender states specifically that the lender will accept the sale proceeds as full compensation for the loan and will give up his/her rights to the deficiency.Failure to ensure that, the lender may file a lawsuit to obtain a deficiency judgment against you.

Deficiency after a Deed in Lieu of foreclosure in Massachusetts

A deed in lieu occurs when a lender agrees to accept a deed to the property instead of foreclosing in order to obtain a title. In this case deficiency is the difference between the fair market value of the property and the total debt. In Massachusetts, a lender can get a deficiency judgment with a deed in lieu of the foreclosure. To inhibit this from happening ensure that it is indicated in writing that the lender accepts the transaction as a full satisfaction of the debt unless it contains this provision the lender will file a lawsuit to obtain a deficiency judgment against you.