What are Mortgage Surplus Funds?
If your lender has obtained a Final Judgment of Foreclosure, they will attempt to sell your home at a Sheriff Sale and the money paid by the successful Bidder will be used to pay the lender.
If the property is worth more than the amount owed to the lender, there may be multiple interested Bidders at the Sheriff Sale, and the winning bid may be more than the total amount owed to the lender. This will effectively satisfy the debt and release you from any obligation to your lender. Any money remaining after the Lender is paid is known as the Mortgage Surplus, or Surplus Funds.
On the other hand, if the home is sold for less than the borrower owed, the remaining balance still owed is known as a deficiency. A lender can seek this amount from the borrower with a separate lawsuit, but this is not a common practice in New Jersey.
Am I Entitled to The Surplus Funds?
If there are Surplus Funds after a Sheriff Sale, any other creditors with liens or judgments may apply for surplus funds. If there are no other liens or Judgments, or the other liens and judgments are less than the amount of Surplus Funds, the funds should belong to the homeowner, or their Heirs.
Example: A borrower owes $200,000 to his lender, who forecloses on the home. The home sells for $250,000 at a sheriff sale. The lender takes the $200,000 to satisfy the debt, and the extra $50,000 is the surplus. If there are no other liens or Judgments the funds should belong to the homeowner, or their Heirs.
How Can I Claim the Mortgage Surplus Funds?
If your home has been sold at a sheriff sale and any surplus funds remain after the lender has satisfied the mortgage debt, the money will be deposited into the Superior Court Trust Fund. According to NJ Court Rules 4:64-3 and 4:57-2, any person who believe they are entitled to all or part of the surplus can file a motion with the court explaining why they are entitled to the money and asking for an order directing payment of the surplus funds.
The County Sheriff who conducted the sale will have information regarding the surplus, if there was any.
If your home was sold at a Sheriff Sale and you believe you are entitled to the Surplus Funds because you are the Homeowner or your inherited the property, contact the Law Office of Ira J. Metrick today.