This information was in a footnote in the morality paper that was submitted by another contributor. A "deficiency judgment" is when then bank can pursue the borrower to pay back the amount of the loss after a foreclosure. What's compelling about the footnote is a list of the states that offer non-recourse loans, which prevents banks from pursuing deficiency judgments.

BTW, one of my banks hired a debt collection agency to pursue the past payments. They are generally customer service oriented and friendly. But I had one encounter with a very aggressive rep who told me that I was required by law to pay, that because their bank was in TN, the laws of California were not in affect, and other inaccuracies. He was out of control and out of line. Just record those conversations, ask for his name, and his supervisor.

"While most states allow deficiency judgments, many states hardest hit by the housing crisis, including Arizona and California, are non-recourse states – meaning that a lender may not pursue a borrower for a deficiency judgment on a purchase money mortgage. See Andra Ghent and Marianna Kudlyak, Recourse and Residential Mortgage Default: Theory and Evidence from U.S. States 5 (Federal Reserve Bank of Richmond Working Paper No. 09-10, July 10, 2009), available at http://ssrn.com/abstract=1432437 (listing Alaska, Arizona, California, Iowa, Minnesota, Montana, North Carolina, North Dakota, Washington and Wisconsin as non-recourse states)."