What are anti-deficiency laws?

Some states have anti-deficiency laws which protect purchasers of residential real property used for his/her primary residence pursuant to a purchase money mortgage. In the event that the purchaser fails to make the mortgage payment and the property is foreclosed (title taken by the lender through a legal procedure) and sold to pay the mortgage, a deficiency between the sale price and the outstanding balance of the mortgage could occur.

Under anti-deficiency laws, if the mortgage is a purchase money mortgage for the purchase of a dwelling occupied by the purchaser, the purchaser will not be held responsible for any deficiency the lender can only recover the property and the proceeds of a subsequent sale, the purchaser does not pay any deficit between the sale proceeds and the outstanding loan balance.

Anti-deficiency laws typically provide no protection for other than purchase money mortgages (such as a second mortgage obtained after the original acquisition) and there is no protection when the property is not used as the primary residence of the purchaser.