Urban legends are stories that are unbelievable but still seem possible. Some examples include wiping out debt with a first payment, scamming money with fake deposit slips, and paying off debt with a fraction of the amount. In the legal world, there’s a myth where a lawyer convinces a judge to give leftover money from a foreclosure sale to the debtor, even though other creditors still need to be paid. This has actually happened, but it’s not a good idea and can be overturned on appeal. When a borrower can’t pay their mortgage, the lender can take back the property and sell it to get their money back. If there’s extra money from the sale, it should go to any other people or companies who have a claim on the property. But sometimes, lawyers make mistakes and convince the court to give the extra money to the borrower instead. This is wrong and can cause a lot of problems for everyone involved. This article is meant to help lawyers and judges understand the right way to handle the extra money from a foreclosure sale. When a borrower can’t pay their mortgage, the first mortgage lender might start a legal process to take back the property. Other lenders who also have a claim to the property sometimes don’t respond to the legal complaint because they know they can’t win. But not responding doesn’t mean they give up their claim to the property, just that they admit the first lender has the first claim. It’s like saying “You’re right, you have priority, but I still have a claim too.” In one case, the property owners didn’t respond to a foreclosure complaint and missed out on getting money from the sale. But the court said they should have a chance to claim it. In another case, a junior mortgage holder didn’t file a claim and lost out on the extra money from a foreclosure sale. But the court said the rules had changed, and now they should have the chance to claim it too. The Florida Rules of Civil Procedure now allow a party to file a claim against another party related to the original case. This means that a junior creditor doesn’t have to file a separate claim to secure their right to any extra money from a property sale. However, it’s still a good idea for the junior creditor to file a claim. If they don’t, they might not get any extra money from the sale. Even if a junior creditor doesn’t attend a hearing about the sale, they still have a right to the extra money. The court will consider all the claims from different parties and decide who gets what. Sometimes, people try to argue that they should get the extra money left over after a foreclosure sale, even if they’re not the ones who bought the house. But courts have said this argument doesn’t work. They’ve also said that it doesn’t matter if the person who bought the house takes a long time to give out the extra money – they still get to keep it. And just because the foreclosure process is based on fairness, it doesn’t mean the courts can give the extra money to whoever they want. In this case, the bank foreclosed on a property and there was extra money left over after paying off the mortgages. The bank and the third mortgage holder both wanted the money. The court decided that the third mortgage holder should get the money because of a rule that says all the lower mortgages have to be paid off before the extra money goes to the owner of the property. The owner of the property argued that they should get the money instead, but the court said they didn’t have the right to the money. The court also said that just because the lower mortgages were wiped out by the foreclosure doesn’t mean the owners get the extra money. When a property is foreclosed, any money left over after the sale goes to the person who used to own the property. However, if there are any liens or debts on the property, that money goes to the people or businesses who are owed money. It’s important for mortgage lenders and other lien holders to make sure they protect their interests and let the court know that they want to get paid from the sale proceeds. It’s also the court’s job to make sure the money is distributed correctly. When a junior lienholder is involved in a foreclosure, they can choose to either file a cross claim or just an answer. Either way, they should also file a motion to get their share of the surplus money from the foreclosure sale. The court is responsible for making sure the money gets distributed correctly, and they may hold a hearing to determine who gets what. Even if a party doesn’t participate in the hearing, the court still has to figure out who gets the money. In the case of Citibank v. PNC Mortgage, Citibank missed a court hearing but still had the right to claim surplus funds from a foreclosure sale. The court made a mistake by not evaluating the interests of all parties involved. This shows that even if someone doesn’t attend a hearing, their rights are still protected. When someone buys a property at a foreclosure sale, they might still have to pay off any outstanding debts attached to the property, like property taxes or fines. When a property is sold in a foreclosure, any extra money from the sale does not go to just anyone. It first goes to pay off any debts or mortgages on the property. Only after all those debts are paid will the remaining money go to the owner of the property or anyone else who has a legal claim to it. Some people might think they can get this extra money easily, but that’s just a myth. The rules are clear: the money goes to pay off debts first, and then only specific people can get any extra money. Anything else you hear about this is just not true. Some people believe that if a bank makes a mistake and puts too much money in your account, you can keep it. But this is just a myth. According to the law, if a bank makes a mistake and gives you extra money, you have to give it back. If you don’t, the bank can take legal action to get the money back, and you can get into trouble. It’s important to always be honest and do the right thing, even if it’s tempting to keep the extra money. This column is from the Real Property, Probate and Trust Law Section. It’s about upholding the principles of duty and service to the public, improving the justice system, and advancing the study of law.
Source: https://www.floridabar.org/the-florida-bar-journal/disbursement-of-surplus-proceeds-from-a-foreclosuresalethe-urban-myth-of-the-race-to-the-courthouse/
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