Understanding Fund Distribution in Maryland Foreclosure Auctions

When it comes to the nitty-gritty of foreclosure auctions in Maryland, things can get a bit tangled, right? If you’re gearing up for the Home Improvement PSI Exam, understanding the flow of funds during a foreclosure is crucial.

Let's break it down! Imagine there's a property with a first mortgage of $60,000 and a second mortgage of $23,500. If that property sells at a foreclosure auction for $88,000, how do the funds get distributed? It’s like a game of musical chairs—with clear rules about who gets what.

First up, we’ve got the first mortgagee, the first in line when it comes to settling debts. They'll walk away with $60,000, as that’s what they’re owed. But wait! What about the second mortgagee? You’d think they’d swoop in next, right? Not so fast!

After paying off the first mortgage, we’re left with $28,000, already making it to the next round. That’s the amount we have to satisfy the second mortgage. So, our second mortgagee, who’s got $23,500 on the books, can definitely get that payment. This is where things sometimes confuse folks. Some might think they only get paid if they force the foreclosure auction. Not true! They’re entitled to payment as long as there are funds after the first mortgage is satisfied.

Now, let’s tally this up—$60,000 plus $23,500 equals $83,500. We started with $88,000, and that means there’s a remaining $4,500 left over. Surprise! That leftover cash goes back to the former owner. It’s like finding a little extra cash in your jeans after lots of laundry—nice, right?

So, let’s circle back to the initial question about the statement that claims the second mortgagee receives nothing unless they force the foreclosure auction. This is the false one! The mortgage world has its complexities, but once you understand these basic principles, you’ll find yourself navigating the waters more confidently.

In essence, understanding fund distribution during a foreclosure auction is not just beneficial for passing your exam; it’s vital for anyone engaging in real estate in Maryland. Keeping these principles in mind will serve you well not just in exams but well into your professional journey in home improvement and real estate.