After a trustee's sale of a home in St. George, Utah, the proceeds from the auction were $195,000. The outstanding loan balance was $210,000. The lender, Sunset Mortgage, wants to recover the remaining $15,000 from the former borrower, Tom. What legal action, if any, can Sunset Mortgage pursue under Utah law?
Correct Answer
D) Sunset Mortgage may file a deficiency judgment action in court to recover the $15,000 shortfall
Under Utah Code Ann. § 57-1-32, after a non-judicial trustee's sale, the beneficiary (lender) may pursue a deficiency judgment against the trustor (borrower) for any shortfall between the sale proceeds and the outstanding debt. However, the deficiency judgment is limited to the difference between the debt and the fair market value of the property at the time of the sale (not simply the auction price), and the action must be filed within three months after the trustee's sale. This protects borrowers from artificially low auction prices being used to inflate deficiency claims.
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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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