A buyer in New Hampshire is purchasing a lakefront property and obtains a conventional mortgage. After closing, the buyer defaults and the lender initiates foreclosure proceedings using the power of sale clause. The property sells at foreclosure for $280,000, but the outstanding loan balance is $320,000. Which statement correctly describes the lender's options regarding the $40,000 deficiency?
Correct Answer
A) The lender may pursue a separate deficiency judgment against the borrower through the court system after the foreclosure sale
In New Hampshire, after a non-judicial (power of sale) foreclosure, the lender may pursue a separate deficiency judgment against the borrower through the court system if the foreclosure sale proceeds are insufficient to satisfy the outstanding loan balance. The deficiency judgment is not automatic — it requires a separate legal action. This is an important distinction: the foreclosure sale itself does not automatically resolve the deficiency.
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Related Topics & Key Terms
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Related Concepts
A VA loan is a mortgage guaranteed by the Department of Veterans Affairs available to eligible veterans, active-duty service members, and surviving spouses. It offers no down payment and no private mortgage insurance requirements.
An adjustable-rate mortgage (ARM) has an interest rate that changes periodically based on market conditions, typically after an initial fixed-rate period. The rate adjustment is tied to a financial index plus a margin.
Closing costs are the fees and expenses paid by the buyer and seller at the closing of a real estate transaction, beyond the purchase price. They typically range from 2-5% of the purchase price.
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