A lender forecloses on a residential property in Boston by power of sale. After the foreclosure sale, the proceeds are $320,000. The outstanding mortgage balance is $280,000, and the costs of the foreclosure sale total $15,000. Which of the following correctly describes how the remaining funds must be handled under Massachusetts law?
Correct Answer
D) The remaining surplus funds must be paid to the former borrower after all senior liens and sale costs are satisfied
Under Massachusetts law governing foreclosure by power of sale, after the foreclosure sale proceeds are applied to the costs of sale and the outstanding mortgage debt, any surplus funds belong to the former borrower (mortgagor). Junior lienholders may also have claims on the surplus in order of their priority, but ultimately any remaining balance after all valid claims are satisfied goes to the former owner.
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Related Topics & Key Terms
Key Terms:
Related Concepts
A trustee sale is a type of foreclosure where a trustee, appointed under a deed of trust, sells the property at auction to satisfy the debt.
Usury is the practice of charging an interest rate that exceeds the maximum rate permitted by state law. Usury laws protect borrowers from excessive interest charges on loans.
A VA loan is a mortgage guaranteed by the Department of Veterans Affairs available to eligible veterans, active-duty service members, and surviving spouses. It offers no down payment and no private mortgage insurance requirements.
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