What is a Deficiency?
When a Middlesex County homeowner owes more than the house is worth, that house is considered to be “underwater.” When a mortgage lender forecloses on a home, the property is sold in a Sheriff Sale. Once the Sheriff Sale is complete, the borrower is entitled to a credit for fair market value on the amount owed. Any additional amount still owed after the borrower gets credit for fair market value is known as the deficiency after foreclosure, or simply the deficiency. For example, if the total amount owed on the mortgage is $250,000, and the fair market value of the property is $200,000, the deficiency after foreclosure would be $50,000. However, the lender must start a new lawsuit to collect the deficiency.
What is a Middlesex County Deficiency Judgment?
If there is a deficiency after a Middlesex County Sheriff Sale, the lender is legally entitled to seek this amount from the borrower. In New Jersey, an action seeking a deficiency judgment must be a separate lawsuit filed by the lender. New Jersey Statute 2A:50-2 states that the lender must start the new lawsuit seeking the deficiency judgment within three (3) months of the sheriff sale if the property is a primary residence, or the confirmation of the sheriff sale if one is necessary. If it is an investment property or second home, the lender has a longer period to file an action for a deficiency. An experienced NJ foreclosure attorney can help you understand your options and rights for your specific case.
Can I Stop a Middlesex County Deficiency Action?
Currently, actions for deficiencies after foreclosure are not common. However, if you are defending the foreclosure and you are concerned about a deficiency, it is possible to reach a settlement with the lender in which they waive the right to pursue a deficiency. Additionally, if you receive a discharge from a Chapter 7 Bankruptcy that included the mortgage debt, the debt will be extinguished and there can be no action for a deficiency.
If you are facing a foreclosure in Middlesex County, NJ and you are concerned about a deficiency, contact Ira J. Metrick today.