ST. LOUIS – Fifty thousand people in Missouri and Illinois went through the devastating process of foreclosure last year. Experts say most of them had no idea they could be entitled to excess funds if they qualified.
Luann and John Rusynyk had no idea when their 17-year marriage was put to the test.
"It's been very, very hard because I did sign the paperwork to pay for it, so I wanted to uphold that and I felt kind of low that I couldn't," said Rusynyk.
After consulting with financial counselors the Rusynyk's made the decision no homeowner ever wants to make: foreclosure.
What they didn't know before our sister station KPNX approached them, was that their foreclosure might be a source of $90,000. It's something called excess sales proceeds. Here's how it works.
When a house is foreclosed on, it may go to auction. But if the house sells for more than the amount it was under water, the additional funds are called excess proceeds. Once the lender gets the money that is owed on the house the extra money must be held at the treasurer's office for three years waiting to be claimed.
Chris Krehmeyer, CEO and president of Beyond Housing, explained how difficult the excess fund process can be.
"There is a way to do it but it's not easy. It's not simple and most homeowners don't know," he said.
Krehmeyer sees more than broken glass in the neighborhoods his organization serves. He sees broken lives due in part to foreclosures.
"It is not a good place to be because everything is stacked against you," he said.
Clayton based foreclosure attorney Greg White agrees. He and others we consulted for this report say by the time letters arrive saying the borrower could be entitled to excess funds many people are long gone, or simply don't want to open another letter from a lawyer or trustee.
"They become so despondent that once the process starts, they simply abandon the premises and they literally don't look back," said White.
But with knowledge comes power. Charles Conner learned he was a candidate to claim excess funds and could get up to $138,000.
"This is something that can still be a positive even in the face of a gloomy situation," said Conner.
Last year, $1 million sat in the St. Louis County excess fund. Less than half was redeemed.
If your home was part of a tax foreclosure you can go to your county treasurer's office and ask to see what your old home sold for and compare it to the debt owed. Most of the counties we checked in Missouri and Illinois do not have these lists on line so you'll have to make the trip. The treasurer's office keeps these funds for three years. If they are not claimed they are sent to a public school fund.
If your home was sold in a bank foreclosure you should contact the foreclosure trustee. The trustees hold on to excess funds for five years and if the money is not redeemed, it is sent to the state treasurer's office and placed in the unclaimed property fund.
Here is additional information sent to us from a firm we consulted for this report:
Handling Surplus Proceeds in Missouri
When funds are received by a trustee for a foreclosure sale, those proceeds are first applied to the costs of the sale. Upon payment of the costs of sale, the funds are used to pay the debt of the secured deed of trust being foreclosed. Helweg v. Heitcamp, 20 Mo. 569 (1855). Senior liens are not satisfied out of sale proceeds because they are not affected by the sale. Id.
Upon payment of the secured debt, the trustee holds the funds for the benefit of the party next entitled to such funds. Reid v. Mullins, 43 Mo. 306 (1869). The mortgagor is normally entitled to the funds, unless that mortgagor has assigned his equity of redemption, either through conveyance or grant of a junior lien. Stulz v. Citizen's Bank and Trust Company, et. al, 160 SW3d 423, 428 (Mo. Ct. App. W.D. 2005). Junior liens are satisfied in order of their rank. McGuire v. Wilkinson, 72 Mo. 199 (1880).
Upon confirmation of the existence of funds, the trustee will ascertain the next parties entitled to such funds. Where there are competing claims for the surplus held by the trustee, that trustee may file an interpleader action to have the court determine priority of claims against the surplus funds RSMo §507.060. The trustee, upon serving all parties may deposit the funds to the court and allow the court to determine the priority of claims.
Where the mortgagor is entitled to the funds, the trustee will exercise reasonable and necessary diligence to establish the whereabouts of the mortgagor. RSMo §447.539(5). Such efforts may include sending correspondence to the property owner's last known address in the ordinary course of business. See. RSMo §447.503(10). If the mortgagor (owner of the funds) does not make any effort to claim the funds within five years, those funds may be presumed abandoned. RSMo §447.530.
Once the funds have been presumed abandoned, the trustee will report such abandoned property to the state treasurer. RSMo §447.539(1). Simultaneously with the filing of the report, the trustee will deliver all funds to the state treasurer. RSMo §447.543(I). Upon delivery, the state treasurer becomes the custodian of the funds, responsible for the safekeeping thereof. RSMo §447.545(1).