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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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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