A mortgage servicer's bid for more than $276,000 in tax sale surplus funds has been shut down by the courts - see who walked away with the money instead
A Georgia appellate court has reversed a six-figure award to a mortgage servicing company, ruling that it failed to substantiate its claim to surplus proceeds generated from a tax sale of a residential property.
The decision, issued April 17 by the Court of Appeals of Georgia, stemmed from an interpleader action following the February 2022 tax sale of a home in Fulton County. The sale generated $438,598.95 in excess proceeds — funds remaining after outstanding property taxes and related costs had been satisfied.
The property, formerly owned by Kelby Nelson, was later redeemed by NewRez, LLC, which operates as Shellpoint Mortgage Servicing, through its tax payment agent, Corelogic Tax Services. The tax sale purchaser ultimately quitclaimed the property back to Nelson, prompting the Fulton County Sheriff to file an interpleader under state law to determine who was legally entitled to the remaining funds.
A tangle of competing claims
Three parties asserted competing claims. NewRez contended it was the mortgage servicer for the Federal Home Loan Mortgage Corporation, commonly known as Freddie Mac, which it said held a first-priority security deed on the property with a payoff amount of $276,763.71. GHFA Affordable Housing, Inc., a nonprofit entity, claimed $6,833.22 based on a subordinate deed to secure debt. A third claimant, Home Equity Credit Series 2021, LLC, argued that Nelson had assigned his rights to the surplus funds to them.
A trial court awarded the full requested amounts to both NewRez and GHFA, rejecting the claim from Home Equity Credit. That ruling, however, did not stand in full on appeal.
Lack of evidence proves costly
In a split decision, the appellate court affirmed the lower court’s ruling in favor of GHFA but reversed the award to NewRez. While reaffirming that holders of security deeds may pursue surplus funds under Georgia law, the court concluded that NewRez had failed to meet the evidentiary threshold required to validate its claim.
Despite asserting that Freddie Mac held the mortgage and that it served as the designated loan servicer, NewRez did not submit key documents - including the deed to secure debt, a mortgage agreement, an assignment of rights, or any servicing contract - to support its position. The only witness presented by NewRez, an attorney representing Corelogic, acknowledged under questioning that he could not recall or verify the critical terms of the mortgage or servicing arrangement.
“The burden of proof lies with the party claiming an interest, not the trial court,” the court wrote. “Claimants must present documentary evidence of their legal interest - not rely on assumptions or references to public records.”
GHFA meets standard, NewRez falls short
GHFA’s claim, by contrast, was upheld without dispute. The nonprofit submitted a valid deed to secure debt into the record, satisfying both statutory and evidentiary requirements under Georgia’s tax sale procedures.
While the court’s ruling turned on what might seem technical deficiencies, legal observers say it carries broader implications. In an era of increasingly complex servicing arrangements, the decision is a stark reminder that mortgage servicers - even those acting on behalf of government-sponsored enterprises like Freddie Mac or Fannie Mae - cannot rely on reputation or assumed relationships alone.
A cautionary tale for the mortgage industry
The ruling underscores a simple but critical principle: in the wake of a tax sale, a servicer’s entitlement to surplus funds must be demonstrated through concrete evidence. That includes documentation of the underlying debt, any assignments, and the legal authority to act on behalf of the mortgage holder.
For entities navigating Georgia’s tax foreclosure landscape, the message is clear: assertive claims are not enough - they must be proven.
