Surplus funds after foreclosure

Most homeowners want to forget about a foreclosure before it even begins. They ignore it until it is too late to do anything about it, even though the claim is false. After the foreclosure sale is falsely reported as “complete”, it is even less likely to think about “surplus funds” that might due to the homeowner.

Generally speaking, there are two ways of looking at surplus funds. The first, used by almost everyone, is to assume that the amount demanded in the foreclosure was used as the “credit bid” to “buy” the property for the Plaintiff (or for the beneficiary in a deed of trust) is equal to the economic loss of that claimant (minus the proceeds of eventual “liquidation” to the third party purchaser.

So if the mortgage was $400,000 and fees and interest claims raised it to $800,000, then nonCPA judges and lawyers assume that the economic loss has already been assessed at $800,000. This amount will be theoretically reduced by the amount of money received from a purchaser when the property is declared as liquidated (even if the third-party purchaser was a closely related entity to one of the named or declared foreclosure players.

Keep in mind that none of these players has ever received one dime from the homeowner in monthly payments nor any money from the proceeds of the sale of the home.

The dark side lawyers will argue the sale as though it falls under the doctrine of collateral estoppel or res judicata, meaning the matter has already been litigated. But the reason for the surplus fund’s statutes present in every state is to make sure that there is no economic incentive to foreclosure as the implied loan account can be subject to a workout. Foreclosure is considered to be the equivalent of the death penalty in civil cases since it causes the homeowner to lose the home, family lifestyle, and even life itself.

So there is a procedure in each state to demand corroboration of the actual economic loss. The dark side lawyer needs to bring forward the unpaid implied loan account that served as the basis for the claim, starting with its creation and demonstrating all debits and all credits to the account, including all payments received affecting the balance of the account.

Judges want to assume that the dark side lawyer did bring forward a claimant who paid for the account and lost money because of a failure of the homeowner to make a payment. But it will always turn out that there is proof or corroboration that the homeowner ceased making payments. There will never be proof or corroboration that the party named as claimant or plaintiff or beneficiary suffered any economic loss. And that is because it did not purchase the implied unpaid loan account nor act as an agent for anyone who did so.

And the reason for that is the entire securitization scheme is designed to remove 100% of the risk of loss in all homeowner transactions.

ANALYSIS: SO, WHAT IS MONEY FALLS UNDER THE CATEGORY OF “SURPLUS FUNDS?”

If the dark side lawyer cannot produce any evidence of the existence and control of an unpaid implied debt, does the sale produce all excess funds? Doesn’t that mean that the named plaintiff or plaintiff or beneficiary suffered no economic loss that they can provide? Does that mean they suffered no default (even if a default could be claimed by someone to whom money was owed)? Doesn’t that mean that those documents were recording of false instruments? Is that an intentional act in concert with others who were spreading the risk?

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