What Are Surplus Funds?

Excess funds, also known as surplus funds, are funds that remain after a foreclosure sale when the amount generated from the sale exceeds the outstanding mortgage debt, plus any associated fees and costs. These funds belong to the previous homeowner or property owner, as they are the surplus from the sale of their property.

Imagine you own a house with a mortgage. Unfortunately, you fall behind on your mortgage payments, and your lender initiates foreclosure proceedings. Eventually, the house is sold at a foreclosure auction.

Here's where surplus funds come into play:

1. Outstanding mortgage debt: Let's say your outstanding mortgage balance is $150,000.

2. Foreclosure sale price: The house sells at auction for $200,000.

3. Associated fees and costs: Various fees and costs related to the foreclosure process, such as legal fees and auctioneer fees, amount to $10,000.

Now, let's calculate the surplus funds:

Sale price ($200,000) - Mortgage debt ($150,000) - Fees and costs ($10,000) = Surplus funds ($40,000)

In this example, the surplus funds amount to $40,000. This money belongs to you, the previous homeowner, as it represents the excess from the sale of your property after satisfying the mortgage debt and associated costs.