Legal Question in Real Estate Law in Massachusetts

Re: forclosure

generally, yes. If a first mortgagee sells at foreclosure sale, and receives more than is owed on the first mortgage, plus their expenses, etc., this is called a "surplus".

The proper thing for them to do at that point is to start an "interpleader" action, where they deposit the money into court, notify everyone who they think has a claim to it (ie, you and citi) and let those folks fight it out (ie, establish their rights to the money).

If the VA just out and pays Citi, they could be subject to a claim by you that Citi wasn't owed the money, or that Citi received more than they should have, and you should have received the balance.

Good luck.