When a financially distressed homeowner sells his or her property for an amount less than the balance due on the property’s mortgage.
- Example : Mitch is selling his home to Pete for $250,000. Mitch still has a mortgage balance of 275,000 remaining on the property held by Star Bank. Star Bank receives $250,000. Star Bank may choose to sue Mitch for the $25,000 deficiency or forgive the deficiency.