Alabama Foreclosure: What is a Deficiency?

Alabama Foreclosure:  What is a Deficiency?

Let’s talk about this.

A deficiency is the difference between what you owed on your home mortgage loan (plus all legal charges/fees) and what the property sold for at the foreclosure sale.

For examAlabama Foreclosure:  What is a Deficiency?ple, if you owed $200,000 and your house sold for $150,000, then you would have a $50,000 deficiency.

What happens if you have a deficiency?

If you have a deficiency, then you may face collection activities (calls, letters, credit reporting, etc), you may be sued for the deficiency, or you may potentially face tax consequences for debt forgiveness.

Often you can settle a deficiency for less than what is owed.

Or you may not be responsible for any deficiency if your mortgage company broke the law when dealing with you….

But it is best to avoid a foreclosure in the first place.

The key, of course, is to not allow a foreclosure.  Find out your options before it reaches that point.

To avoid a foreclosure you can look at these options:

  1.  File bankruptcy.  Not usually a good idea but occasionally it can work for you.
  2. Do loss mitigation — this can be a loan modification, forbearance, deferment, a short sale, a deed in lieu of foreclosure, etc.
  3. You can use the RESPA (Real Estate Settlement Procedures Act) laws to help you stop a wrongful foreclosure — this includes dual tracking, the 120 day rule, notice of error letters, and request for information letters.
  4. You can also use the FDCPA (Fair Debt Collection Practices Act) law to help stop a wrongful foreclosure as usually your mortgage company is considered a debt collector.

Contact us if you have any questions.

If you want to go over your options, we will be glad to help you.

If you live in Alabama and want to discuss your foreclosure issue, give us a call at 205-879-2447.

You can also fill out our contact form and we will get right back with you.

Thanks for reading, and have a great day!

-John G. Watts


  1. Lori says:

    Hi. My husband and I purchased a home in south Alabama. 3 months after moving into the home, my husband lost his job. We have been struggling to keep the home since. We have gotten a few months behind and was put into a trial modification but still have not been able to keep up. My husband has been working the whole time, just not making the same money. We know are facing foreclosure. If that does happen, will we certainly be sued? My husband has done all he can to keep us afloat and I do not want to lose my home but we are now at a point where we can not keep the home. Any counsel would help. Thank you so much

    • JohnGWatts says:


      I’m sorry you are in this position. If there is a foreclosure, it is NOT a certainty that there will be a deficiency. If there is a deficiency, you may or may not be sued. It certainly is a risk but not a certainty.

      Here’s my suggestion — stay in contact with your mortgage company about what is happening and keep asking for help. Document every call, save every letter, every voicemail, etc. Fully comply with any request for documentation from your mortgage company.

      I also suggest you get with a foreclosure defense lawyer — Ken Riemer and Earl Underwood are in Mobile or you can contact my firm.

      Best wishes in your tough situation….

      John Watts
      Birmingham, Alabama

  2. Lori says:

    Thank you for the counsel. We are actually making a 2 hour trip to speak to our mortgage holder in person. We do not want to abandon our responsibility and trying to show them we are making out best effort. We have even enrolled in a budget planning 9 week class in an attempt to be the best steward of what we have. The rest is out of our hands. Thanks again. We will be contacting one of the attorneys mentioned. Lori

    • JohnGWatts says:

      That’s great Lori. Hope it all works out for you. Ken and Earl are great guys who know what they are doing — they’ll be able to give you guidance.

      Best wishes and let us know how things turn out.

      John Watts

  3. […] Companies are allowed to buy old credit card debts, and other debts as well. The most common are deficiencies after the repossession of a vehicle or a deficiency after a foreclosure. […]

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