If the loan in question was a purchase money loan (that is a loan used to purchase the property), the lender cannot collect a deficiency (the difference between the sale price of the property and what is owed). If the foreclosure is non-judicial (sale of the property on the courthouse steps), the law does not allow for a deficiency whether the loan is purchase money or not. If the loan is not purchase money and the foreclosure is judicial (the lender files a law suit), a deficiency can be claimed by the lender. Typically, the exposure that borrowers have is liability for sold-out seconds (junior loans that are wiped out by the foreclosure of the senior loan). Once again, if the loan (the junior loan, in this case) is a purchase money loan, there is no claim for deficiency allowed. If the junior loan was a refinance or was made for something other than purchase of the property, the debt becomes unsecured (just like a big credit card bill) and the lender could sue you to collect it.
Answered on Aug 01st, 2013 at 10:24 AM