QUESTION & ANSWERS REGARDING ARIZONA’S EXCESS PROCEEDS
What are “Excess Proceeds”?
In Arizona, when a house is foreclosed, the process is usually done with a
foreclosure sale, technically referred to as a “Trustee’s Sale”. If the property sells
for more than the amount owed to the foreclosing lender (usually the mortgage
company), then the amount over the loan balance is referred to as “Excess
Proceeds” or “Surplus Funds” (often, some of the sales proceeds will also go to
pay the costs and fees of conducting the Trustee’s sale). Under Arizona State
Law, these Excess Proceeds are generally deposited with the appropriate county
treasurer. If someone believes they are entitled to receive these funds, they must
seek and obtain a court order requiring the county treasurer to turn over the
funds to them. This requires a legal action, and involves very specific laws and
procedural rules. It is very important that these laws and rules be followed
correctly. Because a court proceeding is required, you must be represented by
an attorney, or represent yourself. A non-attorney company cannot represent
you in court.
Who has a right to claim the Excess Proceeds?
Under Arizona Law, any person with a recorded or other legal interest in the
property at the time of the Trustee’s Sale may be a claimant for these funds.
Thus, the person who owned the home prior to the Trustee’s Sale can claim the
funds. Also, if there were any junior mortgages, homeowners association liens, or
tax liens filed against the property, these entities may have a right to the funds
as well.
Can the former homeowner claim the Excess Proceeds, even if there was a
second mortgage against the house?
Maybe. Because Arizona law states that any person with a recorded or other
legal interest in the property at the time of the Trustee’s Sale may be a claimant
for the funds, this certainly allows the former homeowner to claim the funds.
However, Arizona Law also establishes an order of priority for the claimants.
Someone else, such as a junior lienholder (second mortgage) or homeowners
association, may be ahead of the former owner in priority to receive some or all
of the funds. But, if these other entities do not claim the funds, the former
homeowner may do so. In such a case, it is very important that the honeowner
follow all of the laws and rules of procedure including sending proper notice to
all required parties. If the junior lienholder is given proper notice, and does not
respond within the required period, the homeowner will receive the funds,
even though the junior lienholder would have been first in line if they
had claimed them.
Why would a junior lienholder/second mortgage fail to claim the funds?
There are several reasons. Sometimes, they might just overlook them. Also, in
recent years there have been large national settlements which have required
these mortgage lenders to forgive (or write off) billions of dollars in second
mortgages. In these cases, the lenders cannot claim the funds. Additionally,
mortgages are often transferred or sold to other entities, who may not have the
proper documentation to claim the funds. In these cases, the junior lienholders
will not claim the funds.
What should I do if I believe there are Excess Proceeds from the foreclosure of my
house?
Contact my law office. I will be happy to discuss the matter with you, and do the
research to determine whether there are any Excess Proceeds, and whether you
are entitled to receive them. I will do this with no obligation to you. If you do
choose to retain my firm to recover these funds, you will never be required to
pay anything up front. My fees will be paid from the funds when they are
recovered, and if for any reason we are unsuccessful in recovering the funds (for
example, if a second mortgage DOES claim the funds), then you will owe me
nothing. Please feel free to contact me any tine at my direct telephone line
(602) 524-4329, or by e-mail at: rwwilkerson@cox.net.