What is a deficiency judgment?
A deficiency judgment is a court order requiring a borrower to pay the difference between the home's foreclosure sale price and the remaining mortgage balance owed to the lender.
When a foreclosure sale concludes, the sale price may fall short of what the borrower still owes on the mortgage. A deficiency judgment is the legal tool that lets a lender pursue the borrower for that gap. After the foreclosure auction, the lender can file a separate lawsuit asking the court to enter a judgment against the borrower for the shortfall amount, plus costs and interest.
This matters because the judgment becomes a debt obligation the borrower must satisfy. The lender can use it to garnish wages, levy bank accounts, or file a lien against other property. In many states, including New York, deficiency judgments are permitted, though some protections exist for owner-occupied residential properties under certain conditions.
Borrowers do have grounds to challenge a deficiency judgment. Common defenses include proving the foreclosure sale was improper, the property was sold below fair market value, or the lender failed to follow required procedures. A borrower may also argue that the lender's conduct was commercially unreasonable or that statutory protections applied to their situation.
Because deficiency judgments create ongoing liability after the home is lost, contesting one early is critical. Foreclosure defense attorneys in the Hempstead area can review whether the lender followed proper notice and sale procedures and identify available defenses based on the facts of your case.