Once you sell your property in a foreclosure auction, there’s no guarantee that the amount your property sells for is going to completely cover the amount you still owe on your mortgage. In these instances, mortgage lenders are often able to obtain a deficiency judgment and sue for the outstanding balance, leaving many people in a difficult position, wondering what to do after a foreclosure in order to come up with the remaining balance. Thankfully, there are options that you have under California law.
Deficiency Judgments in California
In the state of California, there are two types of foreclosures – judicial foreclosures and non-judicial foreclosure – and each type has a different set of rules when it comes to deficiency judgments.
Non-judicial foreclosures are foreclosures that are not overseen by a court and are instead handled by a private trustee. The majority of foreclosures in California fall under this category. The good news for homeowners facing foreclosure is that California law prohibits mortgage lenders from obtaining a deficiency judgment after a non-judicial foreclosure.
If, however, your mortgage lender chooses to pursue a judicial foreclosure that is overseen by the court, they may be able to obtain a deficiency judgment and sue for the outstanding balance if your property sells for less than the amount you still owe on your mortgage. Even when dealing with judicial foreclosures, though, there are still exceptions that prevent mortgage lenders from obtaining a deficiency judgment. Instances where a mortgage lender cannot obtain a deficiency judgment, include:
- If the mortgage is for a 1-4 unit dwelling that is occupied by the owner
- If the property is seller-financed
- If the property is financed via a refinanced purchase-money loan that was executed after January 1st, 2013.
What to do if you are facing a deficiency adjustment in California
Compared to many states, California is very friendly to homeowners facing foreclosure in the sense that mortgage lenders are not allowed to obtain a deficiency judgment in most instances. Nevertheless, there are still circumstances that will enable mortgage lenders to obtain a deficiency judgment in California.
If a deficiency judgment is obtained, it will be up to the court to determine the fair value of your property and how much you still owe your mortgage lender after the property sells in a foreclosure auction. In these cases, it is essential that you work with an experienced attorney who will be able to help you navigate the process and work to ensure that you end up owing your mortgage lender as little as possible once the case is settled.
At Oak Tree Law, we are experts at deficiency judgment cases, helping our clients avoid deficiency judgments after a foreclosure and fighting to ensure they owe as little as possible if a deficiency judgment is obtained. If your mortgage lender has filed a judicial foreclosure against you and you are facing the possibility of a deficiency judgment, we invite you to contact us today for a free evaluation of your case.