After a Public Trustee foreclosure sale in Arapahoe County, Colorado, the winning bidder paid $280,000 for a property with an outstanding loan balance of $310,000. The original lender wants to recover the $30,000 difference from the former homeowner. What is this legal action called?
Correct Answer
B) A deficiency judgment
When the foreclosure sale proceeds are insufficient to cover the outstanding loan balance, the lender may seek a deficiency judgment against the borrower for the remaining amount. In this scenario, the $30,000 shortfall ($310,000 loan minus $280,000 sale price) is the deficiency. Under Colorado law, deficiency judgments are permitted in certain circumstances following a Public Trustee foreclosure sale.
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Related Concepts
In the context of foreclosure, a deed transfers ownership of the foreclosed property to the new owner, typically the buyer at a foreclosure sale.
Discount points are upfront fees paid to a lender at closing to reduce (buy down) the interest rate on a mortgage loan. One point equals 1% of the loan amount and typically reduces the rate by approximately 0.25%.
An FHA loan is a mortgage insured by the Federal Housing Administration that allows lower down payments and credit scores than conventional loans. It is designed to help first-time homebuyers and borrowers with limited resources.
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