Wesley buys a house for $1,000,000. He puts $400,000 down and borrows $600,000 from a bank, which takes a mortgage on the property to secure the loan. Wesley defaults, and when the bank forecloses on the property, it is worth only $500,000. There is a shortage of 100,000, as the foreclosure sale price was $500,000. The bank brings a legal action against Wesley. Which of the following can help the bank recover the shortage from Wesley?

Question

Quizplus · Accepted Answer

A deficiency judgment is a court order that requires the borrower to pay the outstanding balance of the loan after a foreclosure sale if the sale proceeds are not enough to cover the outstanding loan balance. This allows the bank to recover the shortage from Wesley. Right of redemption allows the borrower to regain ownership of the property by repaying the outstanding loan balance, which is not helpful in this case. Lien release is the removal of a lien from a property, which is not relevant in this scenario. Garnishment is a court order to a third party to withhold money from the borrower's wages or bank account and is not applicable in this case.

Wesley Buys a House for $1,000,000