Issuance of a Deficiency Judgment Against The Mortgagor
Posted by | Posted in Foreclosure | Posted on 17-11-2008
The normal requirement of a mortgage is insurance by the mortgage companies. This is also termed as the PMI or Pre-Mortgage Insurance. Such insurances can be obtained for value upto 80% of the mortgaged property. The insurance is essential because it is a guarantee for the creditor that he will get back his money from the debtor even in case of failure on the part of the debtor to repay if such conditions are covered under the insurance clauses. This adds to the Repayment Plan of the debtor and chances of the lender getting back his dues either by foreclosure or from the PMI.
Real estate market is always fluctuating and there could be significant drop in the prices at any time. In such cases the property mortgaged could be sold at a much lower price compared to the amount for which it was put under lien. If there is no insurance to cover such losses then the creditor is bound to suffer due to downward trend of the prices. Thus insurance acts as a Stop foreclosure help.
In such cases the creditor may obtain a deficiency judgment from the court of law in the state against the debtor. It gives a lien to the lender that the debtor is now obliged to pay the differential amount which means the difference between the sum obtained by auction of the property and the amount which was due as the principal and interest of the loan taken thus providing the lender a legal right to collect the balance amount.
