After a trustee's sale has been conducted in Maryland, the sale proceeds are $285,000 but the outstanding loan balance is $310,000. The lender wants to recover the remaining $25,000 from the borrower. Which legal remedy should the lender pursue?
Correct Answer
B) Seek a deficiency judgment through a court proceeding
When foreclosure sale proceeds are insufficient to satisfy the full loan balance, the remaining unpaid amount is called a deficiency. In Maryland, a lender may seek a deficiency judgment by filing a court action against the borrower for the deficiency amount. The court will determine the deficiency based on the difference between the loan balance and the fair market value (or sale price) of the property. This is the proper legal remedy for recovering amounts not covered by the foreclosure sale proceeds.
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Related Topics & Key Terms
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Related Concepts
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.
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TILA is a federal law that requires lenders to disclose the true cost of credit to borrowers, including the annual percentage rate (APR), total finance charges, and loan terms. It is implemented by Regulation Z.
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