Surplus Funds from Foreclosure Sale Awarded to Foreclosed Homeowner

In a recent opinion out of the Third District Court of Appeal, after a $184,000 winning bid at foreclosure sale conducted by a 2nd mortgage in March 2013, a surplus of $99,500 existed after the second lender’s amount was satisfied. The question faced in this situation is who should be entitled to the remaining $99,500? There are three possibilities: the winning bidder (third party purcahser/investor), the first mortgage holder, or the homeowner that was foreclosed upon. 

The trial court concluded that the equitable solution would be to give the money to the high bidder with further instructions that they pay off the first mortgage held by Wells Fargo.  This is normally what would be expected since the purchaser at auction, who’s property is still subject to the first lender’s mortgage lien, wants to obtain marketable title.  However, the homeowner felt that the surplus should go to them and an appeal was filed.

The Third District Court of Appeal overturned the Miami-Dade Circuit Court’s ruling. The Court of Appeal held that the appropriate party to receive the $99,500 surplus is the homeowner foreclosed on.  The Appellate Court based its reversing decision by strictly following the black letter law of Florida. Florida Statute §45.032(2) in pertinent part states the following:

“There is established a rebuttable legal presumption that the owner of record on the date of the filing of a lis pendens is the person entitled to surplus funds after payment of subordinate lienholders who have timely filed a claim.”

What the statute is saying is exactly on point with the facts of this case.  The homeowners were the “owners of record on the date of the filing of [the] lis pendens” which makes them entitled to any surplus of funds from the sale “after payment of subordinate lienholders who have timely filed a claim.”  The Statute thus places the homeowners right behind junior lien holders in the line to collect surpluses from the foreclosure sales.  The statute completely leaves out first mortgage holders and the high bidder as parties entitled to surpluses from a foreclosure sale.

Full opinion here

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