State Anti-Deficiency Laws and Non-Recourse Laws at a Glance
If you are about to allow a foreclosure or short-sell your home, you may wonder what the lender can do about any left-over debt. In some states, the lender cannot pursue you for the shortfall if your home’s market value is less than the balance of the loan. These states have what are called “no-recourse” or “anti-deficiency” laws. The table below summarizes each state’s anti-deficiency laws.
The Bills.com article How a Deficiency Balance Can Affect You and the definitions below this table explain the terms used here. Consult with a lawyer who has real property experience to see how your state’s rules apply to the facts in your situation.
|Foreclosure||Does This State Offer an Anti-Deficiency Law?||Redemption||Laws|
|Alabama||Both||Non-Judicial||No||1 year||Alabama Code Section 35-10|
|Alaska||Both||Non-Judicial||Yes. Deficiency judgments only if the lender pursues judicial foreclosure under the promissory note; no separate "deficiency judgment" is entered.||Non-judicial, Yes. Judicial, No.||Alaska Statutes Chapter 09.45. Actions Relating To Real Property and Title 34, Ch. 20, Section 100|
|Arizona||Both||Non-Judicial||Yes. Single one-family or single two-family dwelling on 2½ acres or less. Must reside in property 6 months.||
|Arizona State Code Title 33 - Property in 33-814.G and 33-729.A.|
|Arkansas||Both||Non-Judicial||No. Borrowers must receive credit for the greater of the foreclosure sales price or the fair market value of the property. For non-judicial, lender must sue within 1 year.||Judicial, 1 year. Non-judicial, no.||Arkansas Code Title 18 - Property Subtitle 4 - Mortgages And Liens|
|California||Both||Non-Judicial||Yes, for purchase money loans||No||California Civil Code § 2920-2944.7 and Code Civ. Proc. § 580b|
|Colorado||Both||Non-Judicial||No. Lenders must bid fair market value on the property in the event that total debt owed exceeds the property value less reasonable expenses; if the borrower can show lenders bid less than fair market value, the borrower can avoid a deficiency judgment.||75 days||Colorado Foreclosure Protection Act and Colorado Revised Statutes Title 38, Articles 37-39|
|Connecticut||Judicial||No. "Strict foreclosure," lender may sue borrower separately. "Decree of sale," then 1/2 of deficiency is owed.||"Strict foreclosure," yes.||General Statutes of Connecticut 49-14 and 49-28|
|Delaware||Judicial||No||No||Delaware Code Title 10, Ch. 49:XI|
|District of Columbia||Non-Judicial||No||No||District of Columbia Code Title 42, Subtitle I, Ch. 8|
|Florida||Judicial||No, but lender must serve lawsuit personally and deficiency is court’s discretion. Borrower must receive credit for the greater of fair market value of the property or the foreclosure sale price.||Limited||Florida Statutes Title 40, Ch. 702|
|Georgia||Both||Non-Judicial||Deficiency lawsuit must be court-approved within 30 days of sale.||No||Official Code of Georgia Title 44, Ch. 14|
|Hawaii||Both||Non-Judicial||Allowed if the lender pursues judicial foreclosure. Outlawed for nonjudicial foreclosure of mortgage signed after July 1, 1999. Allowed for earlier foreclosures.||No||Hawaii Revised Statutes § 667-5 and § 667-38|
|Idaho||Both||Non-Judicial||No. Deficiency lawsuit must be filed within 90 days of sale. Limited to the difference between the balance owed and the fair market value of the property.||1 year for more than 20 acres||Idaho Statutes Title 45, Ch. 15, Section 45.12|
|Illinois||Judicial||No. Borrower must be personally served with deficiency suit. Judges have great discretion, thus judgments rarely granted.||90-day redemption||Illinois Compiled Statutes Ch. 735, Article XV|
|Indiana||Judicial||No. Borrower must be personally served with deficiency suit.||No||Indiana Code § 32-29-7|
|Iowa||Judicial||Yes, if lender chooses foreclosure without the right of redemption. Mortgaged property is a one- or two-family dwelling and is borrower's primary residence; and borrower does not exercise its right to demand a delay of the foreclosure sale of up to 12 months.||No||Iowa Ch. 654.6|
|Kansas||Judicial||No, if court confirms the sale. Borrower may contest the deficiency if the foreclosure sales price is less than the FMV.||1 year||Kansas Statutes Ch. 60, 2417|
|Kentucky||Judicial||No. Deficiency judgment is entered automatically if the sale proceeds less expenses are not sufficient to cover the debt owed||Yes, if residence sells for less than two-third of the appraised value.||Kentucky Revised Statutes Ch. 426|
|Louisiana||Judicial||Deficiency judgment is only available if property is appraised prior to foreclosure sale and lender uses executory proceeding.||No||Louisiana Code Title 10:9-629|
|Maine||Judicial||No. Lender must credit the borrower for fair market value of the property.||90 days||Revised Maine Statutes Title 14, Part 4, Ch. 403|
|Maryland||Both||Non-Judicial||No||Court-determined||Maryland Rules Title 14, Ch. 200|
|Massachusetts||Both||Non-Judicial||No. Lender must give borrower notice in writing prior to the foreclosure sale that it intends to pursue deficiency.||No||General Laws of Massachusetts Ch. 244|
|Michigan||Both||Non-Judicial||No. May collect deficiency if judicial foreclosure. Rights limited in non-judicial.||6 months following non-judicial||Michigan Compiled Laws Act 210 of 1933; and EPIC Act 236, Sections 600 and 700|
|Minnesota||Both||Non-Judicial||Yes. Advertisement: No deficiency allowed. Judicial: Allowed, but FMV determined by jury.||6-12 months||Minnesota Statute 582|
|Mississippi||Both||Non-Judicial||No. Must file for judgment within 1 year of foreclosure. Mortgagee bid must be reasonable.||No||Mississippi State Code § 89-1-305|
|Missouri||Both||Non-Judicial||No. Heavy burden if judicial. Light burden if non-judicial.||1 year||Missouri Revised Statutes Ch. 141 §400-590|
|Montana||Both||Non-Judicial||Yes in non-judicial. No in judicial technically, but functionally impracticable.||No||Montana Code Annotated Title 71, Ch. 1|
|Nebraska||Both||Non-Judicial||No. Action to collect must begin in 90 days for non-judicial and 5 years for judicial. Borrower must receive credit for the FMV.||No||Nebraska Revised Statutes Ch. 76-1013|
|Nevada||Both||Non-Judicial||No. Borrower must receive credit for the greater of the FMV or the foreclosure sale price. Suit must be filed within 6 months of foreclosure sale.||No in non-judicial. Yes in judicial||Nevada Revised Statutes Chapters 40, and 106, and 107|
|New Hampshire||Both||Non-Judicial||No||No||New Hampshire Revised Statutes Title 38, Ch. 479|
|New Jersey||Judicial||No. borrower must be given credit for the FMV. Suit must be brought within 3 months of foreclosure sale.||10 days or 6 months depending on lender pursuing deficiency||New Jersey Permanent Statutes Title 2A:50-1|
|New Mexico||Judicial||No. Deficiency recovery restricted in low-income cases.||9 months||New Mexico Statutes Annotated Ch. 48, Articles 48-7-1 to 48-7-24 and Articles 48-10-1 to 48-10-21|
|New York||Judicial||No. Action to collect must begin in 90 days. Borrower receives credit for the greater of the foreclosure sale price or the FMV.||No||New York State Consolidated Laws Article 13|
|North Carolina||Both||Non-Judicial||Yes, if lender sold property or borrower. No in conventional sales. Recovery limited in some circumstances.||No||North Carolina General Statutes Ch. 45, Article 2B, Sections 21.36 and 21.38|
|North Dakota||Judicial||Yes if residential property <4 units and <40 acres.||1 year||North Dakota Century Code Ch. 32-19-01|
|Ohio||Judicial||No. Action to collect must begin in 2 years.||No||Ohio Revised Code Section 2329.08|
|Oklahoma||Both||Non-Judicial||No. Action to collect must begin in 90 days. Deficiency judgment if lender pursues non-judicial foreclosure and the borrower must receive credit for the greater of the FMV or the foreclosure sale price||No||Oklahoma Statutes Citationized Title 12, Ch. 12, Section 686|
|Oregon||Both||Non-Judicial||Yes. Lenders can generally not obtain a deficiency judgment on residential property.||180 days||Oregon Chapter 88|
|Pennsylvania||Judicial||No. Action to collect must begin in 6 months.||No||Pennsylvania 42 Pa. Cons. Stat. § 8103 and 231 Pa. Code Rule 3101|
|Rhode Island||Both||Non-Judicial||No||3 years in some circumstances||Rhode Island General Laws Ch. 34-27|
|South Carolina||Judicial||No. Can ask for appraisal to reduce deficiency.||No||South Carolina Code of Laws Title 29, Ch. 3, Article 7|
|South Dakota||Both||Non-Judicial||No. Borrower must be credited for the FMV.||180 days||South Dakota Codified Laws Ch. 21-47|
|Tennessee||Both||Non-Judicial||No||2 years||Tennessee Code Title 21, Ch. 1, Section 803|
|Texas||Both||Non-Judicial||No. Borrower must be credited for the FMV.||No||Texas Statutes Title 5, Section 51|
|Utah||Both||Non-Judicial||No||Yes||Utah Code Title 38, Ch.1-16 and Title 57, Ch. 1|
|Vermont||Both||Judicial||No||No||Vermont Statutes Title 12, Ch. 163|
|Virginia||Both||Non-Judicial||No||No||Code of Virginia Title 8.9A Part 6 and Title 55, Ch. 4|
|Washington||Both||Non-Judicial||Yes. No collection allowed for nonjudicial foreclosure. Collection allowed for judicial.||12-months for judicial.||Revised Code of Washington Title 61, Ch. 61-12|
|West Virginia||Both||Non-Judicial||No||No||West Virginia Code Articles 1 and 16 of Ch. 38|
|Wisconsin||Non-Judicial||Yes. Deficiency action must be filed at the time the foreclosure action starts. Recovery amount limited.||6 or 12 months||Wisconsin Statutes and Annotations, Ch. 846|
|Wyoming||Both||Non-Judicial||No||3 months. Balance due plus 10%||Wyoming Statutes Title 34, Ch. 4|
What the Terms in the Table Above Mean
See the Bills.com article How a Deficiency Balance Can Affect You for a general discussion of this subject.
- Type of Foreclosure
Foreclosure is the legal process through which a lender (most typically a mortgage lender) claims an asset from the consumer borrower. Foreclosure is almost always the result of default on payment.
Foreclosure can be judicial, through the state court system, or privately. A judicial foreclosure means that the foreclosure is a court-ordered legal process. The lender must file an action — a lawsuit — against the homeowner. This process is time consuming and subject to a sequence of events and calendar that consumes months or years. A judicial foreclosure helps by buying the homeowner time to make alternative housing arrangements.
The non-judicial process is made possible by a legal document called a deed of trust. Many western states use deeds of trust in creating home loans. This system avoids a judicial foreclosure, and speeds the foreclosure process. Because the mortgage loan terms specify that default kicks off the sale process right away (without going through the court system), the lender can start the foreclosure process quickly. The the borrower has a fixed period of time (which varies state by state) to either sell the home, or negotiate to solve the financial problem. If the consumer does not accomplish this on their own, the lender then can seize the property and auction off the home to the highest bidder.
- Anti-Deficiency Law
A deficiency balance arises if the sale proceeds are not sufficient to pay the entire balance owed on all secured loans. Under common law, a borrower has liability for a deficiency balance.
A dozen or so states outlaw or restrict the collection of a deficiency balance related to a home foreclosure. These are called anti-deficiency or no-recourse laws. Beware: Anti-deficiency laws are rarely simple or straight forward. If your state of residence offers an anti-deficiency law, do not assume you are protected unconditionally. Take the time to study your state's laws in detail, and consult with a lawyer who has real property law experience with your questions.
Some states allow a homeowner who had their home foreclosed a period of time after the foreclosure to pay-off the mortgage and reclaim the property. In redemption states, it is common for the lender to buy the homeowner's redemption rights so that it can sell the property at auction without any possible claims against the title.
Read your state’s laws to learn more your the foreclosure and anti-deficiency rights.
Although Bills.com takes reasonable care to provide accurate information, errors in law and interpretation can occur. Consult with a lawyer in your state who has experience in real property law to understand your rights and liabilities.