Deficiency Judgment

One of the disastrous repercussions from the 2008 mortgage crisis was the number of mortgages that were upside down, meaning that the homes were worth significantly less than the mortgage amounts being paid. People who let their homes go into foreclosure because they couldn't afford to maintain were sometimes hit with deficiency judgments, as the banks found themselves shortchanged with the lower property values and wanted to extract the difference.

The deficiency judgments were issued when the foreclosure amount was measurably less than the mortgage due and the bank refused to forgive the difference.

Understandably, these deficiency judgments were not frequent. The lender has to show that the foreclosed property sold for a fair price, and that the shortfall difference is substantial enough to warrant filing for the deficiency judgment, since the laws dissuade banks taking a lowball offering to “double dip,” so to speak.