Sometimes, a lender may set the starting bid at an auction for the mortgage, plus additional interest. If a home is sold for more than the balance of the mortgage loan, the difference is called surplus funds.

Homeowners are required to pay lenders after a foreclosure if the sale does not cover the mortgage - banks must return surplus funds to owners if the property brings more than the amount still owed on the loan.

You may be entitled to the entire amount of the surplus if you are the previous homeowner.

To recover the surplus funds, you must act within a certain period. If you fail to take action during the time specified by the state, then you will lose the right to the funds.

If no surplus money claims are filed by the homeowner, then other parties, such as the second mortgage holder, tax lien holder, or credit card lienholder, may file the claim.

When a claim for surplus funds is filed, the court will set a hearing to determine who is entitled to the funds. Typically, subordinate lien holders get access to surplus funds first, and then the balance goes toward paying the second mortgage if there is one.