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2.10.4 Foreclosure Fees and Costs

Foreclosure fees and costs is a broad category of charges that may include attorney fees and other costs associated with collection or foreclosure. Attorney fees are discussed in more detail in § 2.10.6, infra. Foreclosure costs other than attorney fees may include costs for auction advertisements, sheriff’s costs, filing fees, service of process, certified mail, and so forth. Foreclosure costs may vary depending on whether a state is a judicial or nonjudicial foreclosure state and on state law itself. Generally, foreclosure costs must be reasonable and actually incurred before they are recoverable from the borrower.190

Within the category of foreclosure costs, failure to credit the borrower with refunds from a canceled sheriff’s sale is an area ripe for abuse. In some jurisdictions, the sheriff’s department will require an advance deposit from the servicer before initiating a foreclosure sale. The servicer charges the deposit as a foreclosure cost against the borrower’s account. If the sale is canceled, the sheriff returns the portion of the deposit that represents unexpended funds. However, servicers frequently do not credit the refund back to the borrower’s account.191


  • 190 {185} See Mazzei v. Money Store, 2011 WL 4501311 (S.D.N.Y. Sept. 29, 2011) (denying summary judgment when borrower alleged that third-party default service provider did not actually perform services as stated and that fees were not actually incurred by servicer); Korea First Bank v. Lee, 14 F. Supp. 2d 530 (S.D.N.Y. 1998) (lender not entitled to recover more than it paid its attorney or more than was reasonable); In re Riser, 289 B.R. 201 (Bankr. M.D. Fla. 2003); Alaska Tr., L.L.C. v. Bachmeier, 332 P.3d 1 (Alaska 2014) (permitting recovery of all reasonable foreclosure costs in reinstatement amount).

  • 191 {186} In re Hannon, 421 B.R. 728 (Bankr. M.D. Pa. 2009) (servicer failed to adjust proof of claim in bankruptcy to reflect refund of sheriff’s deposit).