What must the lender do to recover the $11,000 deficiency after foreclosure sale where the sale price is $29,000 and the loan balance is $40,000?

What must the lender do to recover the $11,000 deficiency after foreclosure sale where the sale price is $29,000 and the loan balance is $40,000?

• A. Seek a deficiency judgement
• B. Refinance the loan
• C. Foreclose again
• D. Initiate a short sale

Answer: (A)

The key idea is how a lender recovers a shortfall after foreclosure. When the property sells for less than the loan balance, the difference is the deficiency the lender can pursue. Here, the loan balance is 40,000 and the foreclosure sale brings in 29,000, so the typical deficiency is 11,000 (not counting additional costs or interest). To collect that amount, the lender would file a lawsuit to obtain a deficiency judgment from the court. If the judgment is granted, they can then pursue collection of the 11,000. Refinancing or repeating foreclosure doesn’t “get the money back” from the same deficiency, and a short sale isn’t applicable after the foreclosure has occurred.

The key idea is how a lender recovers a shortfall after foreclosure. When the property sells for less than the loan balance, the difference is the deficiency the lender can pursue. Here, the loan balance is 40,000 and the foreclosure sale brings in 29,000, so the typical deficiency is 11,000 (not counting additional costs or interest). To collect that amount, the lender would file a lawsuit to obtain a deficiency judgment from the court. If the judgment is granted, they can then pursue collection of the 11,000. Refinancing or repeating foreclosure doesn’t “get the money back” from the same deficiency, and a short sale isn’t applicable after the foreclosure has occurred.