Most people who find themselves in foreclosure do not anticipate having any money left over after their home is sold. Some may even expect that the bank will pursue the difference between the sale price and the amount they owe on the mortgage at the time of the sale, which is otherwise known as a deficiency. However, for some homeowners, a foreclosure sale can result in their home being sold for more than they owe on their mortgage or a surplus. Just as the homeowner sometimes has to pay the lender in the event of a deficiency, the homeowner may be owed the surplus amount by the lender.
The surplus amount that is generated in a foreclosure sale is generally supposed to go to the last title holder of record, which is usually the homeowner whose mortgage was foreclosed, unless there are other lienholders. If the homeowner had taken a second mortgage on the home, the second mortgage lender has a claim to the surplus funds before the homeowner can receive them if the second mortgage lender takes the appropriate legal steps to file a claim.
According to Florida law, a junior lienholder has sixty days in which to file a claim for surplus funds. Failure to file a claim within the statutory time period means that the junior lien holder loses the right to the surplus funds, and the homeowner of record may claim the funds. Florida courts have interpreted the sixty day time frame as sixty days from the issuance of certificate of title following the foreclosure sale, and not sixty days from the foreclosure auction itself. If no lienholders make a claim to the surplus funds, or the lienholder is beyond the sixty days when filing a claim, the former homeowner can file a claim seeking the surplus funds himself.
If the foreclosure action is brought by the junior lienholder, and there is a surplus, the homeowner is still entitled to the surplus, even though there is a senior lienholder. For example, lienholder A lends homeowner money to buy a house. Homeowner subsequently takes out another loan on the house with lienholder B. If homeowner defaults on lienholder B’s mortgage, lien holder B forecloses on homeowner’s loan, and the home is sold at auction, the home still secures lienholder A’s loan – the original mortgage loan. If there is a surplus in this situation, the funds go to the homeowner. Assuming homeowner stops making payments on lienholder A’s loan, lien holder A can pursue foreclosure on the now sold home, and seek any deficiency from the homeowner.
The homeowner may not be entitled to surplus if the mortgage lender takes title before selling the property to a third party buyer because the mortgage lender then becomes the last owner of record.
Contact Us For Legal Assistance
If you are facing foreclosure, it is important to seek an experienced foreclosure defense attorney to protect your interests and advise you the steps you should take in the event of either a deficiency or surplus in a foreclosure sale. Contact the North Miami foreclosure attorneys at Charlip Law Group, L.C. for a consultation.
