Any time a property is foreclosed and there is a deficiency, the lender has a contractual right to seek a deficiency judgment (this language is usually in the deed of trust, promissory note, etc.). Unfortunately, there are not many good defenses other than a claim that the foreclosure sale was performed improperly and that the bank did not act in good faith and fair dealing by failing to get top dollar for the property. These are vaild arguments, but not very strong.
An alternative is to offer the lender a deed in lieu of foreclosure. This transfers the property to the lender without the necessity and expense of a formal foreclosure. Also,the deed in lieu of foreclosure also precludes the lender's right to seek a deficiency judgment. I suggest that if you take this route to make sure the deed recites that it serves as a complete resolution of the matter and prohibits the lender from any additional recovery from you, including a deficiency judgment.
Keep in mind that the bank does not have to accept a deed in lieu of foreclosure, but they will usually agree to it if the property is in decent shape and to avoid the cost of foreclosing.
Feel free to ask any follow-ups.
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