After a foreclosure auction, what statement regarding the distribution of funds is FALSE?

In the context of foreclosure auctions, the distribution of funds follows a specific hierarchy. The statement that the second mortgagee receives nothing unless he forced the sale can be misleading in certain circumstances, which is why this statement is identified as false.

When a property goes to auction following foreclosure, the proceeds are used to pay off debts in a defined order. Primary mortgages, or first mortgage liens, are typically prioritized and paid from the sale proceeds first. If there are remaining funds after satisfying the first mortgage, then second mortgagees and other junior lienholders may potentially receive payment. However, if the funds from the auction do not cover the first mortgage, the second mortgagee does not automatically receive a payment unless they took action to initiate or force the sale, such as through a judicial foreclosure process.

Understanding this hierarchy and the implications of being a junior lienholder highlights the risks involved in these financial positions. Therefore, it is not universally true that the second mortgagee receives nothing unless they forced the sale, as there may be instances where they could receive partial payments from the auction proceeds depending on the equity in the property and the amount sold for during the auction.