Foreclosure Deficiency Judgements And You
Generally, homeowners who lose their home to foreclosure in Colorado are responsible for any deficiencies that result from the sale of the home. A deficiency may occur if the home is sold for less than the amount due on the mortgage loan. For example, if a borrower owes $250,000 on a property, and the foreclosure sale yields a a bid and sale price of $200,000, the lender may seek a deficiency judgment of $50,000 against the borrower.
Not all lenders pursue deficiency judgments after recovering a property in a foreclosure sale. If it is determined that a borrower has little or no assets that can be recovered after a judgment is obtained, a lender may have little interest in paying additional legal fees to pursue an insolvent borrower. Sometimes lenders will sell the notes to collection agencies for pennies on the dollar, and the agencies will have the right to pursue the deficiency.
In a deficiency lawsuit, borrowers can avoid paying a deficiency judgment to the lender if they can prove the lender sold the home for less than a good faith estimate of the property value. If the bank failed to obtain an appraisal on the subject property prior to the foreclosure sale, a borrower may be able to successfully challenge that the property was sold for less than fair market value.
A foreclosure defense attorney can help you with this process. Contact me today.