In the foreclosure scenario, what is the amount of deficiency after the sale?

• A. 11,000
• B. 29,000
• C. 40,000
• D. 9,000

Answer: (A)

Deficiency after foreclosure is the shortfall remaining on the loan after the foreclosure sale proceeds are applied. You calculate it by subtracting the net proceeds from the loan balance (and any senior liens and costs have already been paid from those proceeds). In this scenario, if the outstanding loan balance was 50,000 and the foreclosure sale netted 39,000 after costs, the difference is 11,000. That 11,000 is the deficiency the lender can pursue. If there were more proceeds, or a smaller balance, the deficiency would shrink or disappear; if there were less proceeds, the deficiency would be larger.