A deficiency judgment can be filed when which of the following occurs?

A deficiency judgment occurs when the proceeds from a foreclosure sale are insufficient to cover the outstanding mortgage debt. In this scenario, the lender can seek a deficiency judgment against the borrower to recover the remaining balance owed on the mortgage. This situation typically arises in the context of foreclosure when the sale of the property does not generate enough funds to satisfy the debt, leaving a shortfall that the borrower is still responsible for.

In contrast, if a foreclosure sale generates excess funds, this would not lead to a deficiency judgment, as the lender would receive more than what was owed. Selling a property above market value does not directly relate to the mortgage debt, thus it wouldn’t be relevant for a deficiency judgment. Lastly, a borrower defaulting on payments does not automatically result in a deficiency judgment until the foreclosure process is complete and the sale proceeds are known. Therefore, the correct understanding hinges on the relationship between the sale proceeds and the outstanding mortgage debt.