Say the total debt owed on the first mortgage is $700,000, but the home sells for $650,000 at the foreclosure sale. The deficiency is $50,000. In some states, the lender can seek a personal judgment, which is called a deficiency judgment, against the borrower to recover the deficiency. Generally, once a deficiency judgment has been obtained, the lender may collect this amount – in our example, $50,000 – from the borrower by doing such things as garnishing wages
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They will seize your bank account, salary, car, furniture and other assets. In the U.S., a lender can get a deficiency judgment against a borrower if foreclosure didn’t cover the debt, but there are ways to prevent banks from securing a deficiency judgment. Lenders can only foreclosure a home and can’t touch a borrower’s other assets.
The deficiency judgment allows it to take money from your paycheck by garnishing your wages, or from your bank by levying against your checking or savings account. Your creditor can take your tax refund to pay your debt, as well.
Once a mortgage lender gets a deficiency judgment against you, it can then proceed to collect on that judgment. If the mortgage creditor was a second lien holder in the foreclosure, it is more likely they will pursue collection efforts, especially if they received little or nothing from the foreclosure sale. This article explains the ways a mortgage lender can collect a deficiency judgment.
For example, if you had $200,000 left to pay on the mortgage and the lender sold the house for $150,000, the lender can pursue you for the $50,000 deficit, plus costs and expenses incurred with collection of this debt. Once the lender receives the judgement, the lender can try to collect through wage garnishment and other methods.
Texas collection agent laws. When a debt collector tries to collect a debt from a Texas resident, it must comply with both Texas debt collection law and the federal Fair Debt Collection Practices Act. A violation of the Texas law may result in criminal or civil penalties.