MORTGAGE FORECLOSURE - WHAT HAPPENS TO AUCTION SALE SURPLUS

This post obviously does not apply to homes which are underwater but to homes that have equity but still subject to foreclosure.

Once the bank has obtained a Judgment of Foreclosure and Sale, it can then sell the real estate. The mortgage foreclosure proceeding culminates with the public auction of the bank’s real estate to the highest bidder. At that point, the property is sold to the bidder, who pays the sale price to a court-appointed referee.  If the amount paid by the successful bidder at the auction sale exceeds the amount due to the mortgagee according to the Judgment of Foreclosure and Sale, then there is created a special fund of the left-over purchase price called the “Surplus Moneys.” For example, if the mortgagee is due $200,000 and the property sold for $300,000, the remaining sale price of $100,000 is the surplus. According to Article 13 of New York’s Real Property Actions and Proceedings Law (RPAPL), there is a procedure for the former homeowner (and other junior lienors, such as second mortgagees, judgment creditors or other lienholders) to petition the court for the release of the surplus moneys.

This from last week just came to my attention:

NY POST - Sen. Sampson’s embezzlement indictment spurs reform in foreclosure suits