What right does a mortgage lender have to any Surplus Funds after the sale of a Foreclosed home in Florida? I am discussing this issue specifically because of recent calls I have had from third-party purchasers who are upset that the lender wasn’t paid off from a homeowner’s association foreclosure sale and also calls from the former owner who wants to know why the lender is now requesting additional funds after the sale. Let’s discuss what rights the lender (bank or investor who owns the mortgage) may have to the Florida Foreclosure Sale Surplus Funds after a foreclosure sale has happened.
Let’s start with a Foreclosure Sale when the lender is the one who forecloses. The Final Judgment of Foreclosure will generally state all final expenses due on the mortgage, including interest, and attorney’s fees that have built up over the course of the lawsuit. However, any expenses that have built up between the final judgment and the actual sale date are expenses that are also due to the lender.
Sometimes it can be years between the final judgment of foreclosure and the actual sale of the property and any fees incurred during that time are due to the lender in addition to the final judgment numbers. This can be due to a number of factors including appeals, bankruptcy, attempted loan modifications, or even a national pandemic. The final judgment will state what the per diem (amount of interest per day) is on how much statutory interest builds up from the final judgment to when the sale date is. If there is further litigation after the final judgment, whether it be through appeals, motions to vacate the judgment, motions to cancel the sale, or any number of other pleadings or motions, the lender’s attorneys will incur expenses that must be paid. All of these expenses will come out of any Florida Foreclosure Sale Surplus Funds that are available, if any.
But what about when there is a foreclosure sale from a Homeowner’s or Condo Owner’s Association? Would the lender on a mortgage be entitled to any of the Florida Foreclosure Sale Surplus Funds when the foreclosure case is filed by the Homeowner’s Association? Based on Florida law, the answer to that is a resounding no. This is because the mortgage lender has a superior lien to that of the association. Florida Statute 45.033(1), “There is established a rebuttable presumption that the owner of record of real property on the date of the filing of a lis pendens is the person entitled to surplus funds after payment of subordinate lienholders who have timely filed a claim.” In a foreclosure case filed by a Condo or Homeowner’s Association, a lender is NOT a “subordinate” lienholder. The mortgage lender’s lien attaches to the property itself and as such, this lien is superior to most other liens. Because it is superior to that of the association’s lien, the mortgage lender always has the right to file its own foreclosure case against the property.
Additionally, because the mortgage lender’s lien is superior and not subordinate, it has no right or ability to come after any Florida Foreclosure Sale Surplus Funds that may be available from the association’s foreclosure case. It doesn’t matter if there are hundreds of thousands of dollars in surplus funds available. Those funds are to be given to the former owner of the property and any subordinate lienholders who have timely filed a claim. A subordinate lienholder is the only one other than the former owner who can request these funds. A third-party purchaser cannot ask for the funds in order to pay off any liens still on the property, because a third-party purchaser is neither the former owner, nor are they a subordinate lienholder. For the same reason, regarding an association’s foreclosure sale, the mortgage lender is neither the former owner, nor are they a subordinate lienholder and therefore cannot request the Florida Foreclosure Sale Surplus Funds in this case.
I hear all the time, when speaking to a third-party purchaser, how unfair it is that the former owner received tens or hundreds of thousands of dollars in Florida Foreclosure Sale Surplus Funds from an association’s foreclosure sale and they didn’t give it to the mortgage lender. They feel the surplus funds should go to pay down the mortgage. However, that just isn’t how the laws in Florida are written. The mortgage lender does not get paid from those funds and there is no law in Florida that states the former owner has to do so. Since the mortgage lien is attached to the property, the lender has the right to foreclose on the property no matter who currently owns it. This is the Florida Legislature’s solution to a person’s ability to assign or transfer a deed to anyone at any time. You can transfer the deed to a property to anyone you wish to, but if the mortgage isn’t paid off, the lender can foreclose because the property was used as collateral. Remember, only the former owner and subordinate lienholders who have timely filed a claim are due the surplus funds.
If you or a deceased family member have lost your property due to foreclosure and you have questions about the Florida Foreclosure Sale Surplus Funds from your case, please give me a call for a free consultation. I handle Foreclosure sale surplus and Tax Deed sale surplus funds in every county in the State of Florida. And I don’t get paid unless I successfully get the funds for you.