## Facts

- B.A. Mortgage, LLC held a senior mortgage on real property and foreclosed.
- A foreclosure sale was held, producing proceeds sufficient to pay the senior mortgage debt and foreclosure costs, leaving a surplus.
- Bank of America, N.A. held a junior mortgage on the same property.
- Bank of America intervened in the foreclosure case and timely filed a claim asserting its junior lien and seeking payment from any surplus.
- The mortgagor’s right of redemption (and any remaining interest in the surplus) had been assigned to another party, who also filed a claim to the surplus.
- At the time the surplus dispute was decided, Bank of America had not obtained a separate judgment establishing the amount due under its junior mortgage.
- The trial court ruled that Bank of America’s junior lien was eliminated by the foreclosure sale because it had not been reduced to judgment, and it awarded the surplus to the mortgagor’s assignee.
- Bank of America appealed.

## Issues

1. Whether a junior mortgagee that intervenes in a senior mortgage foreclosure and timely asserts its lien must obtain a separate judgment on its lien before the foreclosure sale (or before distribution) to share in surplus proceeds.
2. Whether the mortgagor’s assignee of redemption rights has priority to surplus proceeds over a junior mortgagee that appeared in the foreclosure and asserted its lien.

## Decision

- The New Mexico Court of Appeals reversed the trial court’s award of the surplus to the mortgagor’s assignee.
- The court held that Bank of America did not lose its junior lien claim to the surplus merely because it had not obtained a separate judgment on the lien.
- The case was remanded for distribution of the surplus consistent with lien priorities and determination of amounts due.

## Legal Principles

- After a foreclosure sale satisfies the foreclosing mortgage and authorized costs, any surplus is distributed to subordinate interests in order of priority, with any remainder payable to the mortgagor or those claiming through the mortgagor.
- A junior mortgage lien is a property interest; when properly asserted in the foreclosure action, it is not treated as wiped out as to surplus proceeds simply because the junior lienholder has not obtained a separate money judgment.
- An assignee of the mortgagor’s redemption or residual interest takes only what remains after valid, higher-priority liens are paid from the surplus.

## Conclusion

Bank of America, as a junior mortgagee that intervened and timely asserted its lien in B.A. Mortgage’s foreclosure action, was entitled to seek payment from the foreclosure-sale surplus without first obtaining a separate judgment on its lien, and the mortgagor’s assignee could receive surplus funds only after junior liens were satisfied according to priority.


Bank of America, NA v. B.A. Mortgage, LLC, 137 N.M. 368, 111 P.3d 226 (2005)