§3762 — Title 12 Banks and Banking | U.S. Code

Summary

Money from a foreclosure sale must be used in a set order. First the sale pays the foreclosure costs. Next it pays required tax liens or assessments and any earlier liens the sale notice says must be paid. Then it covers service charges and any advances for taxes, assessments, or insurance, outstanding interest, the loan principal (including costs for protecting or repairing the property if the mortgage allows), and finally late fees. Any leftover money goes first to lien holders recorded after the mortgage in the order the law gives them, and then to the person who borrowed the money. If the person cannot be found, if claimants dispute the split, or if there is not enough to pay everyone, the disputed amount can be placed with an official or court that handles contested funds. If there is no deposit process and the foreclosure commissioner asks a court to decide or is sued over the money, the commissioner’s necessary costs for that action may be paid from the disputed funds.

Title 12, §3762

Banks and Banking — Source: USLM XML via OLRC

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

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

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

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

(5)To pay any outstanding interest.

(6)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)To pay any late charges or fees.

(b)(1)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.

(2)If the person to whom such surplus is to be paid cannot be located, or if the surplus available is insufficient to pay all claimants and the claimants cannot agree on the allocation of the surplus, or if any person claiming an interest in the mortgage proceeds does not agree that some or all of the sale proceeds should be paid to a claimant as provided in this section, that part of the sale proceeds in question may be deposited by the foreclosure commissioner with an appropriate official or court authorized under law to receive disputed funds in such circumstances. If a procedure for the deposit of disputed funds is not available, and the foreclosure commissioner files a bill of interpleader or is sued as a stakeholder to determine entitlement to such funds, the foreclosure commissioner’s necessary costs incurred in taking or defending such action shall be deductible from the disputed funds.

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

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