Full question:
Our home went into foreclosure. On Mar. 23, 2007, our home was sold at a public auction to the highest bidder. We had 2 loans. The sale covered the first loan, with about $14,000 left over. What happens to the second loan of about $43,000? I was told it just goes away and we do not owe anything on it. Also we got papers in the mail that says it is a Notice of Deposit of surplus funds in the amount of $14,331.85. It says, "The Trustee has no interest in the funds and is uncertain as to the relative priority claims against the surplus funds and is concerned that trustee will incur liability if the surplus funds are incorrectly disbursed". Does this mean we can collect the surplus funds? And what really happens to the second loan?
- Category: Real Property
- Subcategory: Foreclosure
- Date:
- State: Washington
Answer:
Unfortunately, you probably still owe the lender of the second loan the $43,000.00. While the second lender may have cut off its rights to foreclose, unless your mortgage instrument contains an exculpatory clause, you will still owe the debt. An exculpatory clause is a clause whereby the lender agrees that if it forecloses, it only will get the proceeds of the sale and the rest of the debt will be cancelled. This type of clause is commonly used in commercial transactions, but not residential loans.
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