A Maryland borrower defaults on a deed of trust loan. The trustee conducts a non-judicial foreclosure sale and the property sells for less than the outstanding loan balance. Which term describes the remaining unpaid debt after the foreclosure sale proceeds are applied?
Correct Answer
D) Deficiency, which the lender may seek to recover through a separate deficiency judgment
When a foreclosure sale produces proceeds that are less than the outstanding loan balance, the difference is called a deficiency. In Maryland, after a foreclosure sale (whether judicial or non-judicial trustee's sale), the lender may pursue a deficiency judgment against the borrower through a separate court action to recover this remaining unpaid amount. The lender is not automatically entitled to collect the deficiency — a separate legal proceeding is required.
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Related Topics & Key Terms
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Related Concepts
Predatory lending refers to unfair, deceptive, or abusive lending practices that impose unjustified terms on borrowers, often targeting vulnerable populations. It includes practices like excessive fees, inflated appraisals, and unnecessary refinancing.
RESPA is a federal law that requires lenders to provide borrowers with information about settlement costs, prohibits kickbacks and referral fees, and limits escrow account deposits. It applies to federally related mortgage loans.
The secondary mortgage market is where existing mortgage loans are bought and sold between lenders, investors, and government-sponsored enterprises (GSEs) like Fannie Mae, Freddie Mac, and Ginnie Mae.
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