When you took out your mortgage and note you promised to pay back all of the money you borrowed.
At the foreclosure sale, the money from the sale first pays expenses like the auctioneer, the foreclosure attorney and other fees.
The rest of the money goes to pay off the amount you owe.
If the sale of the house did not bring in enough to cover the total amount you owe, you still owe the bank * money. The money you owe is a “deficiency.”
The bank can sue you for the deficiency. But they must have given you the correct notice before the auction. The notice should have said they planned to “seek a deficiency” after the sale.
Example of a deficiency
You borrowed $200,000 from the mortgage company to buy your house.
Event though you made payments for several years, you still owe the bank $180,000
Your house sold at auction for $140,000.
The auctioneer and foreclosure attorney fees are $10,000.
All this money goes to your lender and you still owe the mortgage company $50,000.
You owe the bank
Payments and interest you have made
Auctioneer and foreclosure attorney fees
Money from the sale of your property
If your home sold at auction for more than the amount you owe the bank, the rest of the money goes to pay 2nd or 3rd mortgages you have on the property. If any money is left after paying off those mortgages, it goes to you.
* When we use the word 'bank' we mean your lender. This could be a mortgage company a trust or even a person.