Foreclosure Surplus Funds Recovery

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Your complete guide to asset recovery after foreclosure

One of the scariest parts of having your home foreclosed is the uncertainty over what’s going to happen to your valued assets. The money you’ve put into your home represents the work you’ve put toward it over your time owning it, and the possibility of losing it all may make it seem like all that work will be going to waste.

Foreclosure doesn’t necessarily mean losing every bit of money you’ve invested into your home, though. In fact, by working under the guidance of asset recovery experts like those at Claim Surplus, you may be able to hold onto a lot more of that money than you’d expect. Many people don’t fully understand what happens with their home equity through the foreclosure process, but once you do, you may realize that you have a substantial amount of the money associated with your home still available to you.

In this blog post, we’ll detail some of what you need to know to understand home equity, its role in the foreclosure process, and what this might mean in terms of money you can keep.

Understanding home equity

As explained in this Investopedia article, home equity is the value of a homeowner’s interest in their home. It’s an asset with a value that fluctuates based on mortgage payments and market forces. Essentially, it’s the portion of the home’s value that the homeowner actually owns. Your down payment establishes its initial value, which then grows as you make payments on your mortgage. An appraisal of the home’s market value will also determine the value of your home equity.

As an asset, home equity can be leveraged as collated for home equity loans or lines of credit. Home equity loans allow you to a certain amount of money for a fixed rate over a given period of time. A HELOC, or home equity line of credit, allows you to borrow up to a certain amount over a certain amount of time at an adjustable interest rate. Both of these are important to know, as they can play a role in what happens to your home equity through the foreclosure process.

What is foreclosure?

Foreclosure is when a lender or mortgage investor reclaims property after a borrower fails to make their mortgage payments, property taxes, or homeowners association fees. When the borrower defaults on their loan, the lender or investor takes control of the property and attempts to sell it to recoup the outstanding amount. This sale usually happens in the form of an auction.

Foreclosure is able to happen because when a borrower takes on a mortgage, the home acts as collateral for the loan. So long as the loan is in place, a lien exists on the title of the home which allows the borrower to reclaim control of the property when the borrower can’t pay off their loan. Once the mortgage is paid off, this lien is removed.

What happens to equity during foreclosure?

The lender or investor selling your home is entitled to no more than the outstanding balance of the mortgage. Since foreclosed homes are usually sold for a higher amount than this balance, surplus funds are available for many homeowners in this situation. These funds are your equity in the home, and remain yours.

This, however, is where home equity loans and HELOCs come in. These each come with additional liens against your home, and lenders of home equity loans and HELOCs are the first ones entitled to any surplus funds from a foreclosure sale.

Let us help you with asset recovery during a foreclosure

Your home equity is one of the most valuable assets you’re likely to own, and it’s important to make sure you hold onto as much of its value as possible through the foreclosure process. Contact Claim Surplus now to find out how we can help.