A borrower in Salt Lake City, Utah took out a $400,000 loan secured by a trust deed at a 6% annual interest rate. The first month's payment is interest-only. After the trustee's sale following default, the lender received $370,000 in auction proceeds. The fair market value of the property at the time of sale was $385,000. The lender files a deficiency judgment action under Utah Code Ann. § 57-1-32. What is the maximum deficiency judgment the lender may obtain?
Correct Answer
A) $15,000
Step 1 — Identify the outstanding loan balance: The problem states the loan balance is $400,000 (the interest-only payment information is a distractor — the principal balance remains $400,000). Step 2 — Calculate both potential deficiency amounts under Utah Code Ann. § 57-1-32: (a) Debt − Auction price = $400,000 − $370,000 = $30,000; (b) Debt − Fair market value = $400,000 − $385,000 = $15,000. Step 3 — Apply the statutory limitation: The deficiency judgment is capped at the LESSER of the two amounts = MIN($30,000, $15,000) = $15,000. The maximum deficiency judgment the lender may obtain is $15,000.
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Related Topics & Key Terms
Key Terms:
Related Concepts
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.
A conventional loan is a mortgage that is not insured or guaranteed by a government agency such as the FHA, VA, or USDA. It is originated and funded by private lenders and may be conforming or non-conforming.
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