Foreclosure Surplus Funds in Massachusetts: How to Claim What Is Left Over

If a Massachusetts foreclosure auction sells your house for more than you owed, the difference does not belong to the lender. Foreclosure surplus funds in Massachusetts are the former homeowner’s property by law, not a bonus the bank keeps for running the sale. Few homeowners hear this before the auction happens, and fewer still know there is a specific process for actually getting that money, with real paperwork the lender is required to send you. Here is what happens to the money after the gavel falls, step by step, and what to do if nobody sends you anything.

What Counts as Foreclosure Surplus Funds in Massachusetts

A surplus only exists if the auction price is higher than what you actually owed on the mortgage, plus the costs of running the sale itself. On an older mortgage with substantial paid-down equity, or in a fast-appreciating market, that is a real possibility and not a rare one. On a mortgage taken out recently or one that has fallen badly behind, with unpaid interest and fees stacking up each month, the gap can close or disappear entirely. Whether a surplus exists at all is the first question, and it is answered only after the sale, not before it.

Step One: The Auction Happens and the Money Is Collected

A Massachusetts foreclosure under a power of sale is a public auction, held after the lender publishes notice in a local newspaper once a week for three consecutive weeks, with the first notice at least 21 days before the sale date. The winning bid is paid to the foreclosing attorney’s office or the auctioneer, not directly to the lender, and that office becomes the one holding the money while it sorts out who is owed what.

Step Two: The Lender May Only Keep What the Mortgage Actually Secures

This is the part the law is specific about. Under Massachusetts General Laws chapter 183, section 27, the mortgage holder may retain, out of the sale proceeds, only what is actually secured by the mortgage: the loan balance, accrued interest, and the costs, charges, or expenses tied to the default and the sale itself, such as attorney’s fees, the auctioneer’s fee, and the publication costs for the newspaper notice. Everything above that amount is surplus, and the statute says plainly that it is rendered to the mortgagor, meaning you, or your heirs, successors, or assigns, unless the mortgage itself states otherwise. The statute adds one more line worth knowing: no one other than the mortgage holder is responsible for checking that the money was applied correctly, so nobody else is going to flag an error in your favor.

Step Three: You Are Owed a Written, Itemized Accounting Within 60 Days

The same statute requires the lender or its representative to send you a written notice within 60 days of receiving the sale proceeds, itemizing exactly where the money went. That notice must include:

• The sale price the property actually brought at auction
• Legal fees charged against the proceeds
• The auctioneer’s fee
• Publication costs for the newspaper notice
• Any other fees deducted
• The surplus amount, if any, that is due to you

If the sale is tied up in further legal proceedings, the 60-day clock pauses until those proceedings end, but the obligation to eventually send the accounting does not go away. If 60 days have passed since you believe the sale closed and nothing has arrived, that alone is worth a call to the foreclosing attorney’s office, since this notice is not discretionary on the lender’s part.

Step Four: Junior Lienholders Usually Stand Ahead of You in Line

A surplus rarely moves straight from the foreclosing lender to the former homeowner with nothing in between. If a second mortgage, a home equity line, a judgment lien, or an unpaid contractor’s lien was recorded against the property before the sale, that lienholder generally has a claim on the proceeds ahead of you, up to what it is actually owed. Massachusetts law requires the foreclosing lender to mail notice of the sale to every person holding a junior interest of record as of 30 days before the sale, which means those lienholders already know the auction is happening and have reason to come forward. Exactly how competing claims get sorted and paid, and what happens if more than one party claims the same dollar, is a question for an attorney rather than something to work out alone, especially once more than one lienholder is involved.

Step Five: What If No One Sends You Anything?

Contact the law office or auctioneer that conducted the sale directly and ask, in writing, for the itemized accounting the statute requires. If the 60 days have passed and you get no response, or the numbers you receive do not add up against what you know about the loan balance, a real estate attorney can request the accounting formally and, if necessary, pursue the money on your behalf. The foreclosing attorney’s office is typically the one holding the funds until they are disbursed, so that is the first call, not the lender’s general customer service line.

Why Most Sellers Never Get This Far

In the deals we have closed, the most common title surprise is an old lien or a second mortgage the homeowner genuinely forgot existed, often one paid off years ago in practice but never formally released from the registry of deeds. That is exactly the kind of claim that can eat into a surplus before it ever reaches you. It is also the main reason selling before the auction generally nets a homeowner more than waiting to see what, if anything, is left over afterward. A sale you control lets you see the actual payoff numbers, clear up old liens with full information, and negotiate, rather than finding out only after the house is gone what the lenders and lienholders decided among themselves. If a lender has not yet scheduled your auction, it is worth reading how selling to a cash buyer while facing foreclosure actually works, or you can request a cash offer to see what your specific numbers look like before any sale date is set.

This explains the general process, not your specific accounting or lien situation. The Attorney General’s Office publishes foreclosure guidance for homeowners at any stage of the process, and a HUD-approved housing counselor can walk through your options at no cost if the auction has not happened yet.