Bank Foreclosures

Tax Delinquent Overages

When a real estate purchase transaction is funded by a loan from a bank, the borrower (mortgagor) uses the real estate as the bank’s (mortgagee’s) security for the loan. When the borrower defaults on the loan for lack of payment, the bank uses court enforcement to take control of the property in order to get their loan funds back by selling the property to the open public.

If the price that the property sells for is greater than the amount of money that the bank needed to repay the loan (mortgage), then the difference is a sum of capital which may be called “surplus funds” is created, which is escrowed into a fund held by the bank, but to which the previous owner of the property (the borrower) is entitled.

Although the bank is required to provide notice to the past owner of the existence of these funds, it is very common for the displaced prior owner to fail to receive such notification or to understand that there could be such a thing as claimable funds from the very agency that had foreclosed them and taken their property from them; so even if they do receive the notice they do not claim the “surplus” funds which were generated by the sale of their property to the new buyer.

These funds may be escrowed by the bank and possibly earn interest for the bank for it’s efforts to keep the funds safe…on behalf of the potential claimant, until claimed by the claimant or until those funds (if unclaimed) may get transferred to the state to be managed as unclaimed assets for an indeterminate period of time. The majority of property owners who experience bank foreclosure of their property, never take any action to see if there was any surplus funds generated from that action or to claim those funds if they do exist.