Mortgage surplus funds, also known as excess proceeds or overage, refer to the money left over after a foreclosed property is sold and all outstanding debts, including the mortgage, taxes, liens, and foreclosure costs, have been paid.

• Foreclosure Sale: When a homeowner fails to keep up with mortgage payments, the lender can foreclose on the property and sell it at auction.
• Surplus Funds Arise When: If the sale price at the foreclosure auction is higher than the total amount owed on the mortgage and other debts associated with the property, then surplus funds are created.
• Example: If a house with a mortgage debt of $200,000 is sold at auction for $250,000, the $50,000 difference constitutes surplus funds.

Distribution of Surplus Funds:

• Primary Mortgage Holder: The lender who initiated the foreclosure is paid first to cover the outstanding mortgage balance and foreclosure costs.
• Junior Lienholders: If there are other liens on the property, like a second mortgage or tax liens, they are paid next, in order of priority.
• Former Homeowner: If there are any funds remaining after all lienholders have been paid, the former homeowner is typically entitled to the surplus funds, representing their remaining equity in the property.

Important Points:

• Claiming Surplus Funds: Former homeowners must actively claim surplus funds, as they are not automatically disbursed. There are specific procedures and deadlines for claiming these funds, which vary by jurisdiction.
• Potential for Scams: Be cautious of companies or individuals offering to help recover surplus funds for a fee, as they may be predatory or fraudulent.
• Legal Assistance: It’s often recommended to seek legal counsel to understand your rights and navigate the process of claiming surplus funds.
• State Laws Vary: Foreclosure and surplus fund laws differ by state, so it’s crucial to research the regulations specific to your location.

To Get Started

Review Foreclosure Records and Documents:
The initial foreclosure notice will often include information about the sale and who is handling it (trustee, officer, etc.).

• Local newspapers often publish foreclosure notices, including sale details and the contact information for the trustee or officer.
• If the foreclosure was a judicial process, court records will provide information about the sale and any surplus funds.

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