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Reserve Your Spot
 

If your property is sold for more than what you owed on your mortgage, it will generate a mortgage surplus fund. The borrower is entitled to this excess money.  

The lender does not get to keep any of the extra revenue from a foreclosure sale. The lender is only entitled to an amount that is adequate to pay off the loan’s outstanding balance plus the costs of foreclosure and sale, and no more.

Read more to learn more about surplus funds from foreclosure auctions.

What Are Surplus Funds From Foreclosure?

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A lender may set the starting price for the mortgage plus additional interest at the auction. Surplus funds are the funds left over after a home is sold for more than the loan balance.

Banks must make the surplus funds available to owners if the property sells for more than the amount still owed on the loan, just as homeowners are compelled to pay lenders after a foreclosure if the sale does not cover the mortgage. If you were the prior homeowner, you may be entitled to the surplus. 

However, you must act within a limited time frame to retrieve the surplus funds. If you do not act within the time frame set by the state, you will forfeit your entitlement to the funds.

The amount you can collect from mortgage surplus money is determined by the amount owed to the lender and the house’s selling price. Surplus funds are calculated by deducting outstanding mortgage balances from the bidder’s purchase price, which includes any and all fees and penalties incurred by the property. To put it another way, surplus funds are the difference between the selling price and the balance due.

If the homeowner does not submit a surplus funds claim, other parties, such as the second mortgage holder, tax lien holder, or credit card lien holder, may do so. When a claim for surplus funds is lodged, a hearing is scheduled to establish who is entitled to the funds. 

Surplus funds are usually given to the primary lender first, and the remaining funds are used to pay off the second mortgage if there is one. If there are any funds left over after all lien holders have been paid, you will be entitled to them.

Who Can Get Surplus Funds After Foreclosure?

How To Claim Surplus Funds From Foreclosure?

A systematic approach must be followed in order to acquire foreclosure surplus funds. There is a lot to go over, and you must file the documentation by prescribed deadlines in order to get the money back. You must also file paperwork with the court and attend a hearing.

These are the measures to take if you want to claim surplus funds from a foreclosure:

  1. Show proof of previous ownership. This is accomplished by demonstrating that you are on title, which may be discovered by conducting a title search.
  2. Provide proof of funding. This is done by looking at the foreclosure records and removing the loans/liens that have been paid. The remaining amount will be given to the previous owner.
  3. Make contact with the trustee.
  4. After you’ve contacted your trustee, fill out a claim form and submit it to both the trustee and the court. If the extra monies are not claimed within 2-3 months, the funds may be handed over to the court.
  5. Once you’ve gathered all of the necessary information, you’ll go through the court’s hearings and motions process to obtain your funds.

How To Check For Surplus Funds? 

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Talk to an Expert
 

To begin, check your state’s unclaimed property website to see if you’re entitled to any money. If you’ve moved around a lot, consider sites like missingmoney.com or unclaimed.org, which can check numerous state databases. Your name and city are used in each state search, to see if there are any funds available.

If you have a maiden name or a middle initial, try them as well. Use common misspellings of your name.

If you have a mortgage that is insured by the Federal Housing Administration, you may be entitled to monies from the Department of Housing and Urban Development. Take a peek at the Department of Housing and Urban Development’s website.

Conclusion 

The previous owner of the property is entitled to the surplus fund. However, if the property has subordinate lienholders, the surplus cash will be distributed in the order of precedence of each lienholder.

Make sure you thoroughly check and comprehend your documentation as you go through the foreclosure process so that you’ll know if you’re entitled to surplus payments.

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