In Oregon, if the foreclosure sale price is less than the amount you owe on the mortgage loan, the foreclosing bank can't come after you for the difference (called the "deficiency") following a nonjudicial foreclosure. But deficiency judgments are allowed with some judicial foreclosures.
In a foreclosure, the total debt that the borrower owes to the bank sometimes 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 $600,000, but the home sells for $550,000 at the foreclosure sale. The deficiency is $50,000.
In some states, the bank can seek a personal judgment against the debtor to recover the deficiency. Generally, once the bank gets a deficiency judgment, the bank 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. (To learn more about deficiency judgments in the foreclosure context, see Deficiency Judgments: Will You Still Owe Money After the Foreclosure?)
Over the years, most foreclosures in Oregon have been nonjudicial. But in 2012, banks switched to judicial foreclosures for various reasons that are no longer applicable. Banks have since reverted to primarily using the nonjudicial process again. (Learn more at Nolo’s Bankruptcy, Debt & Foreclosure Blog "Nonjudicial Foreclosures Likely to Resume in Oregon".)
Deficiency judgments are not allowed after nonjudicial foreclosures. In Oregon, deficiency judgments aren't allowed following nonjudicial foreclosures.
Limitation on deficiency judgments in judicial foreclosures. Deficiency judgments are allowed in judicial foreclosures, but not in foreclosures of residential trust deeds. (Or. Rev. Stat. § 86.797). A “residential trust deed” means a trust deed on property that is residential, consists of four or fewer residential units, and the borrower, the borrower’s spouse or the borrower’s minor or dependent child occupies the property as a principal residence at the time the trust deed is recorded or, in the case of a purchase money loan, the property is intended to be the principal residence of the borrower, the borrower’s spouse or the borrower’s minor or dependent child after the trust deed is recorded. (Or. Rev. Stat. § 86.705).
To find the laws that govern Oregon foreclosures, go to Chapter 86 of the Oregon Revised Statutes.
If you’re behind in your mortgage payments and want to learn about possible defenses or ways avoid a foreclosure, consider talking to a local lawyer. Also, it's a good idea to consider making an appointment to talk to a HUD-approved housing counselor as well.