In which order are mortgage foreclosure sale proceeds allocated?

In California, the proceeds from a mortgage foreclosure sale are allocated in a specific order designed to ensure that debts are settled in a fair and legally established manner. The correct sequence begins with the payment of expenses associated with the sale, such as the costs incurred during the foreclosure process, including legal fees and other administrative costs. These expenses must be satisfied first to ensure that the sale can effectively conclude without encumbrances.

Following the payment of expenses, the next priority is to pay the principal and interest owed on the mortgage. This represents the primary obligation of the borrower to the lender, and ensuring that this debt is satisfied is critical before any remaining proceeds can be distributed to other parties.

After addressing the mortgage's principal and interest, the allocation turns to junior lienors. These are entities holding subordinate liens against the property, such as second mortgages or home equity loans. They are paid from any remaining proceeds as they are lower in priority compared to the primary lien.

Finally, if there are any funds left after addressing the expenses, the principal and interest, and the junior lienors, the remaining amount can be returned to the mortgagor, the original borrower, who may receive any surplus funds from the sale.

Thus, the proper order of allocation from a