When can a lender obtain a deficiency judgment against a borrower?

A lender can obtain a deficiency judgment against a borrower specifically when a foreclosure sale does not cover the loan balance. This situation occurs when the property is sold at foreclosure auction for an amount that is less than what is owed on the mortgage. The lender is then entitled to seek a deficiency judgment for the remaining balance, which is the difference between the loan amount and the proceeds from the sale.

Deficiency judgments allow the lender to recover some of their losses by potentially pursuing the borrower's other assets or garnishing wages, depending on state laws. It’s important to note that deficiency judgments are not typically available if the borrower files for bankruptcy or if foreclosure laws in a specific jurisdiction provide protections that limit or eliminate such remedies for the lender.

In instances where the borrower defaults on a loan or where the property is sold at auction, these actions do not guarantee that a deficiency judgment can be pursued, as they might not result in a shortfall situation for the lender.