What is the purpose of a deficiency judgment?

A deficiency judgment serves the specific purpose of allowing a lender to recover the amount of a loan that remains unpaid after the foreclosure and sale of the mortgaged property. When a property is foreclosed, it is sold to satisfy the outstanding mortgage debt. However, if the sale price is less than the amount owed on the mortgage, the lender may be left with an unrecovered balance.

By obtaining a deficiency judgment, the lender is granted a legal claim against the borrower (mortgagor) for this unrecovered amount, allowing them to pursue various methods to collect the debt, such as garnishing wages or placing liens on other properties owned by the borrower. This process helps lenders mitigate their losses when foreclosures do not fully satisfy the debt owed by the borrower.

In contrast, releasing the borrower from all debt obligations would eliminate the lender’s ability to pursue any balance, and assessing additional fees for late payment does not address the specific situation of a shortfall after foreclosure. Allowing for the immediate sale of the property pertains more to the foreclosure process rather than the collection of any remaining debt after that sale.