What is a deficiency?

Produced by Massachusetts Law Reform Institute
Created July 2013

When you took out your mortgage and note you promised to pay back all of the money you borrowed.

At the foreclosure sale, the money from the sale first pays expenses like the auctioneer, the foreclosure attorney and other fees.

The rest of the money goes to pay off the amount you owe.

If the sale of the house did not bring in enough to cover the total amount you owe, you still owe the bank * money. The money you owe is a “deficiency.”

The bank can sue you for the deficiency. But they must have given you the correct notice before the auction. The notice should have said they planned to “seek a deficiency” after the sale.

Example of a deficiency

You borrowed $200,000 from the mortgage company to buy your house.

Event though you made payments for several years, you still owe the bank $180,000

Your house sold at auction for $140,000.

The auctioneer and foreclosure attorney fees are $10,000.
All this money goes to your lender and you still owe the mortgage company $50,000.



You owe the bank

Your mortgage



Payments and interest you have made

+ 20,000


Auctioneer and foreclosure attorney fees



Money from the sale of your property

+ 140,000


If your home sold at auction for more than the amount you owe the bank, the rest of the money goes to pay 2nd or 3rd mortgages you have on the property. If any money is left after paying off those mortgages, it goes to you.


* When we use the word 'bank' we mean your lender. This could be a mortgage company a trust or even a person.

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