If foreclosure sale proceeds are less than the owed amount, what can the mortgagee obtain?

If foreclosure sale proceeds are less than the owed amount, what can the mortgagee obtain?

• A. A deficiency judgment
• B. A new loan
• C. A lien on the property
• D. A waiver on the debt

Answer: (A)

When the proceeds from a foreclosure sale do not cover the total amount owed on a mortgage, the mortgagee (the lender) has the option to seek a deficiency judgment. This legal action allows the lender to recover the remaining balance owed by the borrower after the sale of the property. The rationale behind a deficiency judgment is that it provides a way for the lender to recoup some of the losses incurred because the sale did not yield enough funds to satisfy the outstanding mortgage debt. If the lender successfully obtains this judgment, they may pursue the borrower’s other assets to recover the remaining amount owed. In contrast, while the other options might seem relevant at a glance, they do not apply to this scenario in the same way. A new loan would not alleviate the existing debt associated with the foreclosure. A lien on the property is not applicable once the property has been sold at foreclosure; instead, it is a claim that exists before a sale as collateral for the debt. A waiver on the debt is generally a forgiving of the debt, which is contrary to the lender's interest in recouping their losses through a deficiency judgment. Thus, obtaining a deficiency judgment is the clear and appropriate action for the mortgagee when sale proceeds fall short.

When the proceeds from a foreclosure sale do not cover the total amount owed on a mortgage, the mortgagee (the lender) has the option to seek a deficiency judgment. This legal action allows the lender to recover the remaining balance owed by the borrower after the sale of the property.

The rationale behind a deficiency judgment is that it provides a way for the lender to recoup some of the losses incurred because the sale did not yield enough funds to satisfy the outstanding mortgage debt. If the lender successfully obtains this judgment, they may pursue the borrower’s other assets to recover the remaining amount owed.

In contrast, while the other options might seem relevant at a glance, they do not apply to this scenario in the same way. A new loan would not alleviate the existing debt associated with the foreclosure. A lien on the property is not applicable once the property has been sold at foreclosure; instead, it is a claim that exists before a sale as collateral for the debt. A waiver on the debt is generally a forgiving of the debt, which is contrary to the lender's interest in recouping their losses through a deficiency judgment. Thus, obtaining a deficiency judgment is the clear and appropriate action for the mortgagee when sale proceeds fall short.