Why was the payoff so much higher at foreclosure?

3 Replies

My FHA loan foreclosed with a principle of $140,000. The bank auctioned the property stating I owed $153,000. It was sold for $155,000 and I only received $800 in surplus from the trustee after they took their fees of over half. Does this sound right at all? I thought the trustee would have accounted for their fees already in the payoff from the lender of $153,000 ... also this seems too high, especially considering the impounded insurance payments were not being made. What other fees can this be? Does the final payoff include past due mortgage payments on top of the principle?

The pay off, on top of the principle balance will include:

Interest from the time of the last payment, late fees, any money the lender spent for property taxes, force placed insurance if your insurance expired, property preservation/inspections, court costs, attorney fees, etc.  I have no idea how trustee fees are handled in your area.  Somewhere in the foreclosure documents is a break down showing the total.

The Deed of Trust (often in Section 22) includes the fee to be paid to the trustee for conducting the sale. Around here 5% is typical. Honestly I'm surprised you didn't have $20k+ in foreclosure-related expenses.

Yes, the payoff would include principal, interest, late fees, etc. ... all the money due to the lender under the Note. 

Originally posted by @Sheryl Williams :

My FHA loan foreclosed with a principle of $140,000. The bank auctioned the property stating I owed $153,000. It was sold for $155,000 and I only received $800 in surplus from the trustee after they took their fees of over half. Does this sound right at all? I thought the trustee would have accounted for their fees already in the payoff from the lender of $153,000 ... also this seems too high, especially considering the impounded insurance payments were not being made. What other fees can this be? Does the final payoff include past due mortgage payments on top of the principle?

 Getting any surplus from a sale is the proverbial needle in the haystack. I would count myself lucky. You just had a loan paid off in full from foreclosure sale. As others have stated, you had your principle, interest as well as fees and costs associated with the foreclosure (Taxes, insurance, late fees, foreclosure fees, etc..). You were made aware of the total debt at least 21 days prior to the sale date. The trustee is usually instructed to add their fees to total debt. I'm guessing you hadn't made your payment in quite some time.

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