Deficiency Judgment Laws in Oklahoma

If you go through a foreclosure in Oklahoma, the foreclosure sale could result in a deficiency. When the foreclosure sale price doesn't cover the balance of the borrower's mortgage debt, the difference between the total debt and the sale price is called a "deficiency." For example, if your total debt is $500,000, but your home sells to the highest bidder at a foreclosure sale for $450,000, the deficiency is $50,000.

In most states, if a foreclosure sale results in a deficiency, the lender may get a "deficiency judgment" (a personal judgment) against you for the deficiency amount. Generally, Oklahoma law permits deficiency judgments, but not under certain circumstances.

Deficiency Judgment Laws in Oklahoma

To read the Oklahoma laws covering deficiency judgments, go to Title 12 and Title 46 of the Oklahoma statutes.

How Do Deficiency Judgments Work in Oklahoma?

Most foreclosures in Oklahoma are judicial and go through the state court system. Deficiency judgments are allowed in judicial foreclosures in Oklahoma.

Nonjudicial foreclosures, where the lender does not have to go to court, are also allowed in Oklahoma. But, you can force the lender to foreclose judicially by taking specific steps at least ten days before the foreclosure sale. While you get the right to opt for a judicial foreclosure if the lender initiates a nonjudicial one, you can prevent the lender from getting a deficiency judgment if you:

• let a nonjudicial foreclosure proceed and
• give timely notice to the lender at least ten days before the sale that the property is your homestead and that you elect against a deficiency judgment.

But converting a nonjudicial foreclosure to a judicial one might be a good idea, especially if you have a defense to the foreclosure.

What Are the Legal Requirements That Must Be Met to Obtain a Deficiency Judgment in Oklahoma (Judicial Foreclosures)?

In Oklahoma, the lender may obtain a deficiency judgment in a judicial foreclosure, but it must request the deficiency judgment:

• when making a motion for an order confirming the foreclosure sale or
• within 90 days after the foreclosure sale. (Okla. Stat. tit. 12, § 686).

The deficiency judgment is limited by the property's market value on the sale date. (Okla. Stat. tit. 12, § 686).

Example. If the borrower's total debt is $500,000, but the home sells to the highest bidder at a foreclosure sale for $450,000, the deficiency is $50,000. But if the home is worth $475,000, the deficiency judgment is limited to $25,000.

What Are the Legal Requirements That Must Be Met to Obtain a Deficiency Judgment in Oklahoma (Nonjudicial Foreclosures)?

Deficiency judgments are also allowed following nonjudicial foreclosures in Oklahoma, but not for homestead properties if you invoke your rights.

How to Prevent a Deficiency Judgment After a Nonjudicial Foreclosure in Oklahoma

The lender may initiate an action to get a deficiency judgment within 90 days of a nonjudicial foreclosure sale. (Okla. Stat. tit. 46, § 43).

But the lender can't get a deficiency judgment 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)).

So, one benefit to letting a nonjudicial foreclosure go forward is that you can prevent a deficiency judgment. However, again, converting a nonjudicial foreclosure to a judicial one is sometimes a good idea, especially if you have a defense to the foreclosure. Talk to a lawyer to learn whether you should consider converting a nonjudicial foreclosure into a judicial one and get information relevant to your particular situation.

Limitation on Deficiency Amount

If the lender does get a deficiency judgment, the court can limit the maximum amount to the lesser of:

• the difference between the total debt—including the amount of the indebtedness, interest, attorneys' fees, as well as the costs and expenses of sale—and the property's fair market value, or
• the difference between the total mortgage debt and the foreclosure sale price. (Okla. Stat. tit. 46, § 43(A)(2)(d)).

What Happens to Second Mortgages, HELOCs, and Other Junior Liens?

Generally, when a senior lienholder forecloses, any junior liens (like second mortgages and HELOCs, among others) are also foreclosed, and those junior lienholders lose their security interest in the real estate. In this situation, junior lienholders are sometimes called "sold-out junior lienholders." But that doesn't mean you're off the hook for the money you still owe to junior lienholders.

Suppose a junior lienholder, like a second mortgage lender, is sold out in this manner, and the foreclosure sale proceeds weren't sufficient to pay what you owe to that junior lienholder. In that case, the second mortgage lender could sue you personally on the loan's promissory note.

So, if the equity in your home doesn't cover second and third mortgages, for example, you might face lawsuits from those lenders to collect the balance of those loans.

Can You Avoid a Deficiency Judgment in Oklahoma?

If you lose your home to foreclosure and the court orders you to pay a deficiency judgment, you might be able to use bankruptcy to eliminate the debt. Or you might have a defense to the deficiency.

Read More Articles

Get tips on what to do (and what not to do) if you're facing a foreclosure in Foreclosure Do's and Don'ts.

Learn about Last-Minute Strategies to Stop Foreclosure.

Find out if foreclosures are on the rise.

Getting Foreclosure Help in Oklahoma

If you have questions about Oklahoma's foreclosure process or want to learn about potential defenses to a foreclosure and possibly fight the foreclosure in court, consider talking to a foreclosure attorney.

It's also a good idea to talk to a HUD-approved housing counselor if you want to learn about different loss mitigation options. You can use the Consumer Financial Protection Bureau's Find a Counselor tool to get a list of HUD-approved housing counseling agencies in your area. You can also call the Homeownership Preservation Foundation (HOPE) Hotline, which is open 24 hours a day, seven days a week, at 888-995-HOPE (4673).