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Financial Consequences of Foreclosure

Financial Consequences of Foreclosure

Learn about the financial consequences of foreclosure, including distribution of sale proceeds, creditors’ priority, surplus, deficiency, and anti-deficiency legislation.


A foreclosure has financial consequences for the mortgagor, the mortgagee, and others who hold liens on the property. In this lesson, we’ll learn how these interests are accounted for in the foreclosure process.

Let’s begin with the effect of foreclosure on lienholders. Mortgages and other liens on the property have a priority order, which determines the sequence in which they’re paid from the foreclosure proceeds. A lien that has priority over another lien is said to be senior to that lien,...