E Funds Paid to Trustee

• Library: Foreclosures Guidebook (2017 Ed.)

E. Funds Paid to Trustee

To the extent that funds are paid to the trustee as a result of the sale, the trustee is under a strict obligation to use these funds in the manner required by law and the terms of the deed of trust.

Modern deeds of trust provide no detailed guidance on how surplus funds are to be distributed after expenses of the sale and the deed of trust being foreclosed on are paid. The standard clause is that the trustee must apply “the excess, if any, to the persons legally entitled to receive it.” Stulz v. Citizen’s Bank & Trust Co., 160 S.W.3d 423, 428 (Mo. App. W.D. 2005). But it is a standard rule in Missouri that junior lienholders are entitled to the surplus proceeds from a foreclosure sale on a senior lien. This is true even if the mortgagor was discharged in bankruptcy on the debt of the junior lienholder. Id.

The funds should be used:

· first to pay the expenses of the sale;

· then to pay the balance due on the debt secured by the deed of trust being foreclosed (assuming the mortgagee was not the high bidder);

· then to pay valid junior

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