Surplus funds after foreclosure

Most homeowners want to forget about a foreclosure before it even begins. They ignore it until it is too late to do anything about it, even though the claim is false. After the foreclosure sale is falsely reported as “complete”, it is even less likely to think about “surplus funds” that might due to the homeowner.

Generally speaking, there are two ways of looking at surplus funds. The first, used by almost everyone, is to assume that the amount demanded in the foreclosure was used as the “credit bid” to “buy” the property for the Plaintiff (or for the beneficiary in a deed of trust) is equal to the economic loss of that claimant (minus the proceeds of eventual “liquidation” to the third party purchaser.

So if the mortgage was $400,000 and fees and interest claims raised it to $800,000, then nonCPA judges and lawyers assume that the economic loss has already been assessed at $800,000. This amount will be theoretically reduced by the amount of money received from a purchaser when the property is declared as liquidated (even if the third-party purchaser was a closely related entity to one of the named or declared foreclosure players.

Keep in mind that none of these players has ever received one dime from the homeowner in monthly payments nor any money from the proceeds of the sale of the home.

The dark side lawyers will argue the sale as though it falls under the doctrine of collateral estoppel or res judicata, meaning the matter has already been litigated. But the reason for the surplus fund’s statutes present in every state is to make sure that there is no economic incentive to foreclosure as the implied loan account can be subject to a workout. Foreclosure is considered to be the equivalent of the death penalty in civil cases since it causes the homeowner to lose the home, family lifestyle, and even life itself.

So there is a procedure in each state to demand corroboration of the actual economic loss. The dark side lawyer needs to bring forward the unpaid implied loan account that served as the basis for the claim, starting with its creation and demonstrating all debits and all credits to the account, including all payments received affecting the balance of the account.

Judges want to assume that the dark side lawyer did bring forward a claimant who paid for the account and lost money because of a failure of the homeowner to make a payment. But it will always turn out that there is proof or corroboration that the homeowner ceased making payments. There will never be proof or corroboration that the party named as claimant or plaintiff or beneficiary suffered any economic loss. And that is because it did not purchase the implied unpaid loan account nor act as an agent for anyone who did so.

And the reason for that is the entire securitization scheme is designed to remove 100% of the risk of loss in all homeowner transactions.


If the dark side lawyer cannot produce any evidence of the existence and control of an unpaid implied debt, does the sale produce all excess funds? Doesn’t that mean that the named plaintiff or plaintiff or beneficiary suffered no economic loss that they can provide? Does that mean they suffered no default (even if a default could be claimed by someone to whom money was owed)? Doesn’t that mean that those documents were recording of false instruments? Is that an intentional act in concert with others who were spreading the risk?

2 Responses

  1. I had the situation where I been telling the regulators that Wells Fargo Bank (Wells) did not purchase my Dept of VA loan form Washington Mutual Bank (WAMU) were Wells story is they were not the lender and that they were working for Ginnie Mae who they say was the investor (what the owner of the debt who is using a non-judicial foreclosure act in Nebraska) owner of the debt. What not understood by the local county registers is the fact that over 95% of all Fed Gov backed mortgage loans are Ginnie pooled meaning that the mortgage Notes are endorsed in blank and relinquished to Ginnie the day the loan is accepted into the bank’s Ginnie MBS. Now the problem with Ginnie system is that ownership of the Notes causes a separation of the Note & debt that the county is not requiring that the county is informed of an ownership change of the Notes which causes a separation of the Notes and Debt, but in the case of WAMU they were still the mortgage servicer and the custodian of the records. The trick is that nobody knows of the Ginnie process and because its a blank endorsement it can simply be transfer back to WAMU and nobody is the wiser. So, as WAMU was in trouble, they were allowed to sale the mortgage servicing of the 1.3 million ($140 billion) Fed Gov backed loans which was the beginning of Ginnie seizing the portfolio as an exchange of the investor loan debt that WAMU could not pay back due to its financial situation. WAMU after transferring the servicing it created Assignment of Deed of Trust to 99% of these loans unless the titling was incorrect and assign them to Wells as if they purchase the debt, because Ginnie is prohibited from buying or selling a mortgage loan and does not purchase this mortgage loan debt. The flaw to the process is that WAMU is determined to be a “failed bank” and stops existing having no possession of a mortgage loan which those loans are in the possession of Wells who claiming to still be servicing the mortgage loans that have been abandoned by WAMU who is unable to complete the terms of the mortgage contract and does not exist to collect payment so these payment should not flow through Wells to pay the obligation of WAMU, and are a windfall for the homeowners. FDIC allows the assets of the homeowners to be stolen by Wells and given to Ginnie who does not lend monies! The titles that WAMU could not transfer when it was alive cannot after the fact be transferred to after they stop existing. The FDIC assigns some loan to Wells and MERS assign some loan to Wells both after WAMU stopped existing. All loans are uniformly accepted in the Ginnie MBS and removed from the MBS, but in this case we got the issuer/bank not repurchasing the debt of any of the investor unsecured loans but the mortgage loans were being foreclosed while still being a part of the Ginnie MBS which is not the proper way as the proceeds of the foreclosure sale is to payoff the allege mortgage loan debt, yet that monies went to Ginnie were there would not be monies to pay the mortgage loan, but the reality is that the loans stopped existing and there is no debt for the entire 1.3 million batch of mortgage loans. There not a report made to the credit agencies as WAMU was not owed a mortgage loan debt!

  2. Are their surplus funds to be considered if the Plaintiffs winning bid is $252,000, however, after the Plaintiff receives the Certificate of Sale & Title, they sell to a third party for $302,000, whom then, sells for $600,000?

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