Can a lender come after me for the balance of a mortgage on a house that was foreclosed on and sold at auction?

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Can a lender come after me for the balance of a mortgage on a house that was foreclosed on and sold at auction?

I received a letter from the mortgagee about the remainder of my home loans that were not covered by the foreclosure sale.They say that they will take me off their books if I paid them $12,000 of the $37,000 that wasn’t recovered in the sale.

Asked on October 27, 2010 under Real Estate Law, Missouri

Answers:

M.D., Member, California and New York Bar / FreeAdvice Contributing Attorney

Answered 10 years ago | Contributor

When  house is sold for less than the amount remaining on an outstanding balance, that creates a deficit or "deficiency".  In most states a lender has a right to sue a borrower and obtain a "deficiency judgment" to collect the shortfall. However, some states including MO, have what is know an "anti-deficiency" statute.  This means that typically a deficiency judgment may not be obtained by a lender in a foreclosure situation - regardless of the auction sale price. 

Note:  These are laws protect purchasers of residential real property used for his/her primary residence pursuant to a purchase money mortgage.

Since I don't know all of the details of your situation you should consult with a real estate attorney in your area.


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