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What Are "Surplus Funds"?
If the purchase price at the foreclosure sale exceeds (you) the borrower's loan balance, this extra amount is called "excess proceeds" or "surplus funds."
Example: Your home sells at the foreclosure sale for $350,000. You owe the foreclosing lender $300,000 (the remaining balance on your loan). The additional $50,000 is surplus funds.
After the foreclosure, any surplus funds get distributed to lienholders and (you) the former homeowner.
What Happens to Excess Proceeds from a Foreclosure Sale?
Generally, if any junior liens were on the property- a second mortgage or HELOC, or a creditor that recorded a judgment lien against the property- those parties get first dibs at the surplus funds. Then, any excess proceeds left over after paying off these liens belong to (you) the former homeowner.
Example: Trevor and Lindsey go through a foreclosure. At the foreclosure sale, their home sells for $350,000. The loan balance they owed the foreclosing lender at that time was $300,000. This means that the sale resulted in surplus funds of $50,000. The property was also subject to a second mortgage for $15,000 and a judgment lien for $5,000 due to unpaid credit card debt. So, in this situation, $300,000 goes to the foreclosing lender, $15,000 goes to the second mortgage holder, and $5,000 to the judgment creditor. Trevor and Lindsey can claim $30,000.
However, a junior lienholder could lose its rights to the excess proceeds if it doesn't respond to the foreclosure proceedings or follow the correct procedures for claiming the surplus. Also, (you) the foreclosed homeowner has to make a claim in a timely manner to get their share of surplus funds from the foreclosure.
How Much Time Do I Get to Claim Excess Proceeds?
You'll need to act quickly to claim surplus funds after a foreclosure. A limited amount of time will be available for you to get the funds. The exact amount of time you'll get depends on state procedures.
After a designated period of time, also known as the dormancy period, with no activity or contact, the property becomes “unclaimed” and—by law—must be turned over to the state. Unclaimed surplus funds usually go to the state's unclaimed property division. We may still be able to access the funds if that is the case in your situation.
How Do I Claim the Surplus Funds From My Property's Foreclosure?
Again, you will need to act quickly to claim surplus funds after a foreclosure. A limited amount of time will be available for you to get the funds.
We do extensive searches through county records to locate excess funds. Once your funds are located, we perform a detailed search to properly identify any rightful lienholder(s).
After your free consultation, you sign the agreement to become a client and authorize us to process your claim at NO UPFRONT COST TO YOU.
We do all the legwork. From filing, corresponding with attorneys appearing in court, proving ownership- ALL WITH ZERO COST TO YOU UNLESS WE RECOVER YOUR ASSETS.
After successfully recovering the assets you’re owed, we overnight you a check.
What’s the catch? There isn’t one! The best part of working with Money Matters Asset Recovery is that there is absolutely NO RISK for our clients. If we don’t recover your money, you don’t pay a dime. All of the attorney fees are covered no matter what. There is NO UPFRONT COST. We pride ourselves on being transparent, trustworthy and effective.
Source: Nolo