Results of Foreclosure

What is the aftermath of the auction?Effect on Mortgagor (The Borrower)Loss of Home: The borrower is evicted.A foreclosure stays on a credit report for 7 years, making it very hard to rent or buy again.(a) Deficiency JudgmentsThe Scenario: The borrower owes $200,000. The house only sells for $150,000.The Gap: The bank is still short $50,000.The Action: The bank can sue the borrower personally for this remaining $50,000. This is called a Deficiency Judgment. It allows the bank to garnish wages or seize other assets to get paid.(b) Effect on Creditors (Junior Liens)The "Wipe Out": Foreclosure usually wipes out junior liens (second mortgages, credit card liens) recorded after the mortgage being foreclosed.The Risk: If the auction money runs out after paying the First Mortgage, the Junior Mortgage holders get $0.(c) Effect on TitleThe Clean Slate: The new buyer at the auction receives a title that is generally free of the old mortgage and junior liens. This encourages people to bid on foreclosures.