Mortgage Foreclosure Surplus Funds Claim
Feb. 12, 2017
When you fall behind on your mortgage, your lender may initiate the steps to foreclosure on your home or property and sell it at a public auction. The proceeds from the sale go towards paying off the mortgage.
If your home was just sold at a foreclosure, then you probably weren’t expecting any money after your home sold. In fact, you may have heard that you might owe the bank money. While that might be true if your home sold for less than the mortgage amount, what happens if your home is sold for more than you owe on it?
Most homeowners are surprised to learn that they might be entitled to monies after a foreclosure if the home is sold for more than the loan. If you still have equity after a foreclosure, the funds belong to you—the original homeowner—not the bank.
What are Surplus Funds?
Sometimes a lender may set the starting bid at the auction for the mortgage plus additional interest. If a home is sold for more than the balance of the mortgage loan, the difference is called surplus funds.
Just as homeowners are required to pay lenders after a foreclosure if the sale does not cover the mortgage, banks must return surplus funds to owners if the property brings more than the amount still owed on the loan. You may be entitled to the entire amount of the surplus if you are the previous homeowner. However, to recover the surplus funds, you must act within a certain period. If you fail to take action during the time specified by the state, then you will lose the right to the funds.
If no surplus money claims are filed by the homeowner, then other parties, such as the second mortgage holder, tax lien holder or credit card lienholder, may file the claim. When a claim for surplus funds is filed, the court will set a hearing to determine who is entitled to the funds. Typically, subordinate lien holders get access to surplus funds first and then the balance goes towards paying the second mortgage if there is one. If there are any remaining funds after all lien holders have been paid, you will be obligated to that surplus. After one year, unclaimed surplus funds are treated as unclaimed property and usually go to the local or state unclaimed monies division.
If you believe that the bank will notify you of excess funds, then you are wrong. Banks don’t usually go out of their way to tell consumers about surplus funds. Often these funds go unclaimed as many homeowners either don’t know that they are entitled to money left over after a foreclosure or are too stressed after the fact to investigate whether or not there is any funds leftover. Going through a foreclosure is an emotional process. Most people just figure that the house will be sold for what they owe or less.
Although the court is required to try to notify the previous owner of records of extra funds, the court clerk may not have a forwarding address for the former homeowner, so sometimes the notification falls through the cracks. In fact, back in 2011, NBC 5 Chicago reported back that roughly $16 million in mortgage surplus funds were just sitting at the Clerk of the Circuit Court of Cook County. These funds were sent to the Clerk because they weren’t claimed by homeowners.
It is worth it to recover surplus funds after a foreclosure. These are monies that are owed to you by the bank. It is up to you to be informed, track and recover surplus funds.
Recovering Surplus Money
Recovering surplus funds can be complicated as there is lots of paperwork involved in the process. To receive foreclosure surplus funds, a systematic procedure must be followed. There are multiple hoops to jump through, and you must file the paperwork within certain deadlines to recover the funds. Plus, you must make filings with the court and attend a hearing. This is why you need an experienced attorney that is familiar with recovering surplus funds.
A surplus funds recovery attorney can help you determine how much money is owed to you by the trustee. They can guide you through the entire process of recovering surplus monies. However, don’t wait to talk to a lawyer as there is only a limited amount of time to file surplus funds claim after a foreclosure.
Get Free Legal Advice for Mortgage Foreclosure Surplus Funds Claim
If you believe that you might be entitled to a surplus of funds, contact the Consumer Center for Resources right away. We connect consumers to lawyers for free legal advice and guidance so that you can claim surplus funds that are rightfully yours.