Who Does the Trustee Work For in a Foreclosure Sale?

In many states a foreclosure sale is run by a substitute trustee. The trustee stands between the lender and the homeowner, conducts the auction and holds every dollar the sale brings in. The law expects that person to be neutral. In practice the same firm can be the lender’s own counsel, the trustee who runs the sale and the bookkeeper for the proceeds, which leaves one side of the transaction in charge of the count.

The payoff figure decides the surplus

The winning bid pays the costs of the sale first and the loan second. What remains after those, and after any other liens on the property, is surplus that belongs to the homeowner. Every dollar added to the payoff comes out of that surplus. In the example in the video the high bid is $268,400 and the sale costs are $11,900. With a payoff of $214,300 the surplus is $42,200. When the payoff grows to $253,000 the surplus falls to $3,500.

Three documents decide the number

• The payoff worksheet, which shows how the balance, default interest and late fees were built.
• The advance invoices, which are the receipts for taxes, insurance and property preservation charges.
• The trust ledger, which records every dollar in and out of the account that held the sale proceeds.

All three are held by the firm on the other side of the sale, and they are rarely handed over unless someone asks for them. The servicer, the default vendor, the foreclosure firm, the trustee and the notary are each licensed or commissioned for their own piece of the work, and none of them audits the total.

Four ways to get the math in writing

1. Demand the accounting in writing. Ask the trustee for the settlement statement and the trust account ledger for your sale. Date the request, send it by certified mail and keep the receipt.
2. Request the loan records from the servicer. A written request for information goes to the address the servicer has designated for those requests. A request sent to the trustee’s office instead may never start the response deadline (12 CFR 1024.36(b)).
3. Report it to the licensing body. The body that licenses the attorney or trustee can subpoena trust account records, which a homeowner cannot do.
4. Ask a court to compel it. Before the sale, that can be an order to halt it. After the sale, it can be a motion for an accounting or for the surplus to be deposited with the court.

Money that nobody claims tends to stay with the party that calculated it, and silence is usually read as agreement with the math. Asking in writing is what puts the figures on the record.

How a sale is run, who may serve as trustee and how surplus is paid out all vary by state. This video is general information and is not legal advice. If you want the records behind your own payoff figure examined, upload your documents for a free analysis, or read more about how we investigate mortgage records.