Here’s a little trick lenders used to do. (I’ve been out of the business quite a while, don’t remember the exact details and the details may have changed anyway.)
Instead of a deficiency, the lender makes the loss “forgiveness of debt”, filing a 1099 Mis. Income on “behalf” of the borrower.
Doesn’t get any money for the lender, which they are unlikely to get anyway from a deficiency, but it gives a lender a bit of satisfaction knowing the IRS may collect a portion they can’t.
That’s not just a trick, it’s a trap that debtors can get into when they use certain “debt forgiveness” programs or otherwise negociate with lenders for reductions in fees owed. The lender is supposed to file that form, not out of spite, but by law. However, the borrower can still include the tax debt into a Chapter Seven BK. Now if someone just had a good strategy for avoiding student loans since I will be graduateing with about 120K in debt (if I actually make it to CRNA school).
By the way I have seen several people in foreclosure completely BEAT the process when their attorneys raised affirmative defenses (to the foreclosure) involving violations of Truth in Lending, loan origination fraud ect. The fact is that the mortgage process is so complex, and so potentially fraught with error, and fraud that many times a lender will (let a loan go) rather than fight an aggressive defense in court. There were even a couple of attorneys I knew who specialized in bringing these types of counter suits and defenses ( I saved referrals to these guys for when the mortgage company refused to negotiate it was my plan B). They got results and on two occasions Conti (a subprime lender) actually FORGAVE two entire loans rather than defend the accusations (thus the person went from foreclosure to having a free and clear home).