What is the distribution order of proceeds from a foreclosure?

😀 Real Property • Security Interests in Real Estate PROP#227

Legal Definition

Proceeds are applied in the following order: The Amazing Furry Juggling Man

1. Attorney's fees and court costs
2. The principal and accrued interest on the Foreclosed Loan
3. any other Junior Interests
4. the Mortgagor

Hypothetical

Hypo 1: Amy owns Whiteacre. When she originally bought it, it was a piece of land in the middle of nowhere, but it is now next to one of the most popular theme parks in the country. Her original mortgage was for $50,000 and she has slowly been able to pay it down over the years, but has recently lost her job. Unfortunately, after months of not paying on her mortgage, her lender, Bank, forecloses on Whiteacre. Bank is owed $10,000 on the mortgage. When Whiteacre is sold at the foreclosure sale, it brings in a winning offer of $500,000 due to its proximity to the theme park. Result: The $500,000 is first spent on attorney's costs and court costs associated with the foreclosure. Next in line, the $10,000 plus interest that Amy owed to Bank is paid off. Next, if Amy had any additional mortgages or interests on the property, they are paid off. Finally, last in line, is Amy. If any amount of the $500,000 is left, it is hers to keep. After all, her only mistake here was not paying her mortgage. It doesn't mean she isn't owed the equity that she built up in her property over the years.

Related Concepts

How do states treat a mortgage without a note? How do states treat a note without a mortgage? How is a mortgage's priority determined? How may a party be a holder in due course of a note? In lieu of foreclosure, what do many installment contracts prefer and how do courts address this alternative? Under which theories may a mortgagee take possession of a property and begin receiving rents before foreclosure? What are the 5 types of security interests in real estate? What are the benefits of the holder in due course status? What are the limitations of a junior interest? What are the methods of transferring a note? What interests does a foreclosure destroy? What is a deficiency judgment? What is a due on sales clause? What is a foreclosure? What is an installment land contracts? What is a receivership? What is a redemption in equity? What is a statutory redemption? What is the result of a grantee assuming the mortgage? What liabilities are associated with a mortgaged property that is transferred to another party? What occurs in intermediate theory states? What occurs in lien theory states? What occurs in title theory states? What results from a party purchasing a foreclosed property subject to a senior interest? What security interests exist under a absolute deed? What security interests exist under a deed of trust? What security interests exist under a installment land contract? What security interests exist under a mortgage? What security interests exist under a sale-leaseback? Who may transfer their interest in a mortgage?

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