Question 30

The mortgagor is entitled to the excess proceeds.

In this case, the mortgagor is entitled to the excess proceeds from the foreclosure sale. Since the property sold for $100,000, which exceeds the outstanding loan amount of $70,000 and related expenses of $5,000, the mortgagor can claim the difference.

A) The trustee is entitled to the excess proceeds.

This option is incorrect because the trustee's role in a foreclosure is to oversee the process and may not necessarily claim excess proceeds. Instead, any surplus from the sale typically belongs to the mortgagor after satisfying debts and costs.

B) The mortgagor is entitled to the excess proceeds.

This option is correct as the mortgagor has a right to any surplus after the foreclosure sale. In this scenario, the excess proceeds amount to $25,000 ($100,000 sale price minus $70,000 loan and $5,000 expenses), which rightfully belongs to the mortgagor.

C) The mortgagee must file a claim in the courts for the excess.

This option is incorrect because the mortgagee is not entitled to the excess proceeds and does not need to file a claim. The excess funds are directly attributable to the mortgagor, making this unnecessary.

D) The lender is entitled to all proceeds.

This statement is incorrect as the lender, or mortgagee, is only entitled to recover the loan amount and related expenses. Any proceeds beyond these amounts are to be returned to the mortgagor.

Conclusion

The correct answer, that the mortgagor is entitled to the excess proceeds, is supported by the principle that any surplus from a foreclosure sale, after covering the loan and related expenses, belongs to the borrower. All other options fail because they misinterpret the distribution of proceeds following foreclosure, specifically regarding the rights of the mortgagor versus the lender and trustee.