Buying a home can be stressful, especially if it’s your first time purchasing. Preparing yourself ahead of time with the correct questions will help you know what to expect and ease concerns. Asking the right questions will also help you find the lender that works best for you and your needs. Lenders at SmartMortgage are […]
Can Your Lender Sue You for Deficiency?
When a lender forecloses on a mortgage, the total debt owed by the borrowers to the lender frequently surpasses the foreclosure sale price. The difference between the sale price and the total debt is called a deficiency.
Lenders Can Sue During Foreclosure in Missouri
A deficiency judgment is a court order giving a mortgage lender the right to collect the deficiency from the borrower. When a lender is awarded a deficiency judgment, the borrower is personally liable for the amount of the deficiency. The lender can then sue the borrower to collect what they are owed.
If you live in Missouri, there is no statute prohibiting deficiency judgments after foreclosure. In some cases, the lender can even sue the borrower during the foreclosing action rather than after the foreclosure is finalized. The borrower may be liable for the deficiency even if the sales price of the home is less than the property’s fair market value.
Most Lenders Can Pursue Deficiencies
When it comes to foreclosures, lenders can pursue deficiencies in more than 30 states, including:
Judgments don’t have to be obtained right away—some lenders will wait until the borrower has recovered financially to have the deficiency judgment ordered. Releasing the title of the property doesn’t mean you’re in the clear. Once a deficiency judgment is declared by the court, lenders can come after you financially in any state. They can:
- Have your wages garnished from your paycheck
- Levy bank accounts
- Request your financial records
In a worst-case scenario, you could even be put in jail.
There’s No Guarantee a Lender will Sue
Legal action is expensive and time consuming, so there’s no way to know if a lender will go after you for a deficiency judgment or not. Many times, lenders will figure that you didn’t have the money to make your payments in the first place, so it’s likely they won’t receive anything from you in the future. In this case, they are usually not going to come after you for the deficiency. Regardless, it’s a good idea to discuss a repayment plan with your lender.