In reality, though, banks almost never sue their former clients for a deficiency judgment. In all of the time that we have been working with homeowners in foreclosure, no bank has ever sued the homeowners if they lost the house. So, in most cases, foreclosure victims who do not come up with a solution to stop foreclosure do not have anything further to worry about after the foreclosure is over. Most homeowners in this situation are preoccupied with the task of finding a new place to live and repairing their financial lives. But the lenders do not act out of compassion for the homeowners when they decide not to pursue another lawsuit.
This is because it is simply not worth the extra time and effort for the bank to sue for a deficiency judgment when they are aware of the fact that the homeowners went into foreclosure because there was a significant financial hardship that either severely decreased income or raised expenses. Having an extra judgment against homeowners who have gone through the foreclosure process will not get the mortgage company any more money, and it will only cost them more to proceed with the legal process. Foreclosure is expensive and often results in a loss to the bank, and pursuing the deficiency will only contribute to the loss, in most situations.
So the possibility of a deficiency judgment it can be a danger for homeowners living in states where such practices are allowed, but banks rarely sue for the former homeowners. The very circumstances that led them into foreclosure will act to protect them from being sued for even more money. Obviously, this is small consolation to homeowners who have faced financial ruin and are just now beginning to pick up the pieces of their lives, but at least the mortgage company that proceeded with the foreclosure will not stick the foreclosure victims with another negative mark on their credit and another bill that will eventually need to be paid.
Rich homeowners that own many assets and have a lot of cash are in danger of being sued for a deficiency judgment. However, this describes very few actual foreclosure victims, who are often dealing with job loss, medical issues, or the sudden increase in the mortgage payment. These homeowners, who have faced a serious financial hardship, will not be targeted by their mortgage company for an additional lawsuit after the foreclosure process has ended. Of course, this is only because avoiding the deficiency judgment is in the lender's interest, but most homeowners have very little to worry about from their former mortgage company in terms of being sued for the difference between what they owed on the mortgage and what the house sells for at sheriff sale.