Mortgage Lender After Foreclosure is Entitled to Sale Proceeds

Question: For the last few years my mother has been struggling with competency issues. Although we try to help her, we live in Buffalo.  She apparently did not make her mortgage payments, and there has been a foreclosure sale on her Ahwatukee home. The mortgage lender was the only bidder at the foreclosure sale, and now owns her Ahwatukee home.  In her neighborhood the home prices have been appreciating, and when the mortgage lender sells the home, the mortgage lender should be able to sell the home for much more than the amount of the mortgage loan and the foreclosure costs.  Is my mother entitled to any of this profit?

Answer:  Probably not. A foreclosure sale is a public auction by a mortgage lender of a home that generally takes place at the office of a title company.  If a buyer outbids the mortgage lender and any other buyers, and purchases the home at the foreclosure sale for more than the amount of the mortgage loan, plus the foreclosure costs, your mother could be entitled to those “excess proceeds” (after fulfilling statutory requirements).  As a practical matter, however, usually the only “buyer” at a foreclosure sale is the mortgage lender, and the mortgage lender makes a “credit bid” in the amount of the mortgage loan, plus the foreclosure costs.  The mortgage lender then is the new owner of the home.  If the mortgage lender as the new owner of the home then sells the home for a profit, the mortgage lender is entitled to all of this profit.

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