Pennsylvania Deficiency Judgment Law

A deficiency is created when a lender forecloses on a property and receives less than what was owed on the property.  A deficiency judgment is created when a lender sues and gets a judgment on the amount still owed on the loan after the foreclosure. Pennsylvania has the following restrictions on obtaining a deficiency judgment:

  • A separate lawsuit to collect on a deficiency must be filed after the completion of the foreclosure sale;
  • Notice must be given to the debtor of the deficiency lawsuit or no deficiency judgment can be taken against him/her;
  • If the property is sold, either directly or indirectly, to the lender at the foreclosure sale, a deficiency judgment is limited by the fair market value of the property at the time of the foreclosure.  (42 Pa. Cons. Stat. Ann. 8103(a)).

Regarding the last bullet point, in a situation where $100,000 was owed on the property when foreclosed upon, the property sold at foreclosure for $70,000, and the property was actually worth $90,000, a mortgage company could only seek a $10,000 deficiency (the amount owed minus the fair market value) even though it actually lost $30,000 (the amount owed minus the foreclosure sale price).

What the fair market value of a property is can be difficult to determine and the homeowner and the mortgage company will likely disagree as to that value.  If you live in Pennsylvania and have questions about whether your particular situation might give rise to a deficiency judgment, speak to an attorney in your area for specific guidance.  Or continue searching this site for potential foreclosure alternatives

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