12 U.S.C. § 3762: Disposition of sale proceeds

Summary

When a property is sold after foreclosure, the sale money must be paid in a set order: first the costs of the sale; then any tax liens required by the sale notice; then older liens the notice says must be paid; next service charges and advances for taxes, assessments, and insurance; then interest; then the mortgage principal (including allowed costs to protect or repair the property); and finally any late charges or fees. Any leftover money goes first to lienholders recorded after the mortgage (following federal or state priority) and then to the borrower. If payees can’t be found, there is not enough money, or claimants disagree, the official can deposit the disputed portion with a court or authorized official. If the official has to ask a court to decide or is sued, the official’s needed costs may be taken from the disputed funds.

Title 12, §3762

Banks and Banking, Source: USLM XML via OLRC

(a)Priority payments

Money realized from a foreclosure sale shall be made available for obligation and expenditure in the following order:

(1)Costs of foreclosure

To cover the costs of the foreclosure proceeding described in section 3761 of this title.

(2)Tax liens

To pay valid tax liens or assessments if required by the notice of default and foreclosure sale.

(3)Prior liens

To pay any liens recorded before the recording of the mortgage which are required to be paid in conformity with the terms of sale in the notice of default and foreclosure sale.

(4)Service charges and advances

To pay service charges and advances for taxes, assessments, and property insurance premiums.

(5)Interest

To pay any outstanding interest.

(6)Principal

To pay the principal outstanding balance secured by the mortgage (including expenditures for the necessary protection, preservation, and repair of the security property as authorized under the mortgage agreement and interest thereon if provided for in the mortgage agreement).

(7)Late charges or fees

To pay any late charges or fees.

(b)Other payments

(1)Other lienholders and the mortgagor (2) Disputed claims

Any surplus of proceeds from a foreclosure sale, after payment of the items described in subsection (a) shall be paid in the following order:

(A)First, to holders of liens recorded after the mortgage in the order of priority under Federal law or the law of the State in which the security property is located.

(B)Second, to the appropriate mortgagor.

Editorial Notes

Codification Section is based on section 813 of title VIII of S. 2281, One Hundred Third Congress, as reported July 13, 1994, which was enacted into law by Pub. L. 103–327.

§3762 Disposition of Sale Proceeds

Summary

Title 12, §3762

Notes & Related Subsidiaries

Editorial Notes

Citations & Metadata