Foreclosure victims are frequently entitled to money after a foreclosure sale. The funds remaining after satisfying all lienholder obligations belong to the homeowner (mortgagor). These funds are called Surplus Funds. Sadly, they are often left unclaimed.
The process for recovery is multistep. It involves making numerous filings with the court and a holding hearing. A systematic procedure, outlined herein, must be followed. We are contacted from potential clients throughout North Carolina - and as far away as Atlanta and New York- regarding the recovery of Surplus Funds. This is critical for the former homeowner!
The mortgagor-client is the “Petitioner”, the individual seeking recovery of the funds. The process starts by verifying the Petitioner’s ownership and loan documents. The deed is the foundation for the claim of funds. The deed must have adequately conveyed the property to the Petitioner. Logic dictates that the Petitioner must have been the lawful owner of the home subject to foreclosure, in order to claim funds resulting from its sale. The loan document used in North Carolina is a deed of trust , which is a three party instrument involving a trustee. The deed of trust should be corroborated to ensure its validity and incorporation of the Petitioner.
Foreclosure sale formality is next verified, first by reviewing the adequacy of the Notice of Foreclosure Sale and Service upon the Petitioner. Following the foreclosure sale, Notice by the trustee - that surplus funds remain - should have been issued to the Petitioner. The Final Report and Account of Foreclosure Sale should also have been issued. These documents should be reviewed concurrently for accuracy and veracity.
The Petitioner should then submit a signed affidavit supporting her claim for surplus funds. This document states the relevant details, such as the address of the subject property and amount of funds sought.
The next step, and perhaps the most important, is submitting the Petition to Determine Owner of Surplus Funds, Motion to Claim Funds and Motion to Disburse Funds (i.e., the “Petition”). The job of the Petition to tell who the owner is and why the funds should be distributed.
The Petition is analogous to the Complaint in a typical lawsuit and operates in a very similar fashion. Therefore jurisdiction should be addressed, the facts should be articulated in such a matter as to support the Petitioner’s claim, and a claim of relief must be included (which, in this case, is the recovery of the surplus funds).
The claim of surplus funds is technically an adversarial proceeding. Thus, the Petition should be submitted to all parties having a claim adverse to the Petitioner. At this stage all debt obligations should have been satisfied, so it is very possible that no adverse parties exist. If there are no adverse parties, then notice should be provided to the trustee.
The hearing with the office of the clerk of court is the last significant hurdle. The hearing officer will review the aforementioned information, and ensure everything is accounted for. If any adverse parties are present, they will be provided an opportunity to be heard. A well-organized Petition increases the efficiency of the hearing.
After a successful hearing, and a submission of an Order and Motion to Disburse Funds, the funds should be ready for disbursement. This step can take a few weeks, often at the consternation of the Petitioner.
Recovery of the surplus funds is a process; one that does not happen overnight. Yet the hurdles faced in recovery are manageable. The funds belong to the victim of foreclosure and should not be left with the court.