In Oklahoma, if you go through a judicial foreclosure and the sale price isn't enough to cover the balance of your mortgage, the foreclosing party (the "lender") can come after you for the deficiency. The lender can also seek a deficiency judgment following a nonjudicial foreclosure, but not if you notify the lender that the property is your homestead.
Read on to learn what a deficiency judgment is, when your lender can collect one against you in Oklahoma, and when it can't. (For more articles on foreclosure in Oklahoma, visit our Oklahoma Foreclosure Law Center.)
When a lender forecloses, the total debt owed by the borrowers frequently exceeds the foreclosure sale price. The difference between the sale price and the total debt is called a deficiency.
Example. Say the total debt owed is $200,000, but the home sells for $150,000 at the foreclosure sale. The deficiency is $50,000.
In some states, the lender can seek a personal judgment against the debtor to recover the deficiency. Generally, once the lender gets a deficiency judgment, the lender may collect this amount—in our example, $50,000—from the borrowers by doing such things as garnishing the borrowers’ wages or levying the borrowers’ bank account. (Learn about methods that creditors can use to collect judgments.)
(To learn more about deficiency judgments in the foreclosure context, read Deficiency Judgments: Will You Still Owe Money After the Foreclosure?.)
Most foreclosures in Oklahoma are judicial and go through the state court system.
Nonjudicial foreclosures, where the lender does not have to go to court, are allowed in Oklahoma. But the homeowner has the right to opt for a judicial foreclosure. (To learn more about the difference between judicial and nonjudicial foreclosure, and the procedures for each, see Will Your Foreclosure Take Place In or Out of Court?)
Deficiency judgments are allowed in judicial foreclosures. In Oklahoma, the lender may obtain a deficiency judgment in a judicial foreclosure, but it must request the deficiency judgment:
Deficiency judgments are also allowed following nonjudicial foreclosures, but not for homestead properties if you invoke your rights. The lender may obtain a deficiency judgment within 90 days of a nonjudicial foreclosure sale, but not if the borrower sends written notice to the lender by certified mail at least ten days before the foreclosure sale that the property is the borrower’s homestead (as defined in the Oklahoma Constitution) and that the borrower elects against a deficiency judgment. (Okla. Stat. tit. 46, § 43(A)(2)(c)).
Limitation on deficiency judgments for both judicial and nonjudicial foreclosures. The maximum amount allowed for a deficiency judgment is the lesser of:
To find the Oklahoma statutes, go to the State Legislature’s webpage. Hover over “Legislation” at the top of the page and click on “Browse Oklahoma Statutes.” The statutes governing foreclosures and deficiency judgments in Oklahoma can be found in Title 12 and Title 46.
If you’re facing a foreclosure and are worried about a deficiency judgment, consider talking to a local foreclosure attorney. A foreclosure attorney can explain different options that might be available to prevent a foreclosure, like a loan modification, forbearance agreement, or repayment plan. If you can’t afford to hire a lawyer, consider speaking with a HUD-approved housing counselor.