A Tennessee property sells at a non-judicial foreclosure sale for $195,000, but the outstanding loan balance, fees, and costs total $220,000. What term describes the $25,000 shortfall, and what must the lender do to recover it from the borrower in Tennessee?
Correct Answer
B) It is called a deficiency, and the lender must file a separate lawsuit to obtain a deficiency judgment
When a foreclosure sale proceeds are insufficient to cover the full outstanding debt, the difference is called a deficiency. In Tennessee, the lender cannot automatically collect the deficiency; they must file a separate civil lawsuit to obtain a deficiency judgment against the borrower. The lender then has the rights of an unsecured creditor to pursue collection of the deficiency amount.
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