Wesley buys a house for $1,000,000.He puts $400,000 down,and borrows $600,000 from a bank against the property as collateral.When Wesley defaults,the bank decides to foreclose the property.However,the property depreciated significantly and it is worth is only $500,000 now.The bank brings a legal action against Wesley to claim the $100,000 shortage.Which of the following court doctrines can help the bank recover the shortage from Wesley?

Question

Quizplus · Accepted Answer

Deficiency judgment is a court order that enables the lender to recover the remaining balance of the debt from the borrower after a foreclosure sale if the sale proceeds are insufficient to pay off the loan. In this case, since the property depreciated and was only worth $500,000, there is a $100,000 shortage. The bank can use deficiency judgment to recover the remaining amount from Wesley. Right of redemption allows the borrower to reclaim the property by paying off the outstanding debt, but it is not relevant in this case as the bank already foreclosed the property. Lien release removes the lien from the property title, but it does not help the bank recover the shortage. Summary judgment is a decision made by a court without a full trial, but it is not applicable in this scenario as the bank needs to present evidence and arguments to obtain a deficiency judgment.

Wesley Buys a House for $1,000,000