If you default on a mortgage, can the lender do a deficiency judgment against you?
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If you default on a mortgage, can the lender do a deficiency judgment against you?
Asked on August 25, 2011 South Carolina
Answers:
FreeAdvice Contributing Attorney / FreeAdvice Contributing Attorney
Answered 13 years ago | Contributor
Whether or not a lender can sue a borrower for a deficiency judgment after a foreclosure of real property depends upon whether or not the borrower's loan is "purchase money" or not and if a given state's laws has anti-deficiency statutes.
A loan is "purchase money" if the borrower obtains a loan for the acquisition of a residence designed to be the buyer's primary residence. If the property is then lost in foreclosure, many states preclude the lender for suing the borrower for any amount for less than what the home is acquired for at a foreclosure below the amount owing on the loan.
Some states like California have laws precluding a deficiency judgment against the borrower when a home is lost in foreclosure even if the loan secured by the home is not purchase money if the foreclosure is done through a non-judicial foreclosure as opposed to a judicial foreclosure.
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