The state of Florida is one of the top foreclosure states in the country and many homeowners are facing the possibility of losing their homes. Foreclosure laws are often sophisticated with long timelines. The following article explains each step in the Florida foreclosure process, beginning from the first missed mortgage payment to an eventual eviction notice.
To start with, when an individual buys a property and signs a mortgage on the house, a promissory note must also be signed. Both of these are separate legal instruments. The Promissory Note displays the homeowner’s promise to pay and the due dates for those payments. The Mortgage puts the property as collateral, thus securing the promissory note. It allows the property to be repossessed if the agreement in the promissory note is breached. Payments on a mortgage are usually collected by loan servicer. Most frequently this servicer may actually be different from the true owner of the loan.
The First Missed Payment
A missed mortgage payment is the first step in the Florida foreclosure process, although it does not have to be if the homeowner immediately catches up with the payment. The loan servicer most likely allows a 10 to 15 day grace period on a missed payment and after that, a late fee may follow. The late fee is usually calculated about five percent of the overdue amount using both principal and interest. The late fee is thoroughly explained in the promissory note. Once the grace period passes, the servicer begins notifying the homeowner phone calls, mail or email to find out why the payment has been missed.
At this point, the homeowner might choose to speak with the servicer and explain why they have fallen behind or were unable to pay. Putting together a loss mitigation plan is crucial at this stage to avoid further damage.
30 Days Past Due Notice and Consequent Missed Payments
When the account becomes 30 days past due, the delinquency is usually posted to the borrower’s credit history. Depending on whether other payments missed or not, the initial late payment posting might not affect the person’s credit score too dramatically. If the loan servicer has not called or sent out emails yet, they typically will at this point. Even if they call or email, they will send out notices via mail to each person on the loan as well. Working with the servicer at this point would at the best interest for the homeowner. Considering other options such as a loan modification, payment plan or forbearance agreement might, at the very least, delay the foreclosure process. The homeowner may also get legal advice to explore other ways of putting the foreclosure on hold. A foreclosure attorney could help advise on actions to take and options available. If the homeowner is struggling with other financial liabilities due to lost job or large medical expenses, they might want to contact a bankruptcy attorney.
Lis Pendens indicates the beginning of foreclosure process in Florida. It is publicly recorded notice that the lawsuit against the borrower and real property to foreclose was filed. It also notifies all parties that might claim interest on the property that the borrower is at default on mortgage payments. Within the foreclosure process, a lis pendens tells the homeowner or anyone else with interest in the property, that it is facing foreclosure. This record tells anyone researching the property about the possible foreclosure sale. This might be another lender whom the homeowner contacted to refinance the existing loan or the title company who handles the sale paperwork. The lis pendens informs that the homeowner has 30 days to stop the foreclosure process from advancing, by catching up with missed payments. Once a lis pendens is filed, the property is considered to be in the process of pre foreclosure until it is sold at auction or the process is halted. Even though this is technically a pending lawsuit, as long as the homeowner retains ownership to the property, they can still refinance or sell the house in pre-foreclosure. The lis pendens is essentially a warning to anyone with interest in the property that ownership is disputed. Anyone who eventually buys the house, refinances it or rents it will have to abide by the resolution of the lis pendens. Title companies typically will not insure a property title with a lis pendens.
The loan servicer typically waits at least 120 days of delinquency have passed before filing a state court case to start the foreclosure process. This is due to a regulation that came out in 2014 from Consumer Financial Protection Bureau that requires servicers to wait at least this long to give borrowers an opportunity to pay. During those 120 days, the servicer typically sends out multiple notices about overdue payments and opportunities for loss mitigation. This is another chance for the homeowner to come to a solution to the delinquency with the loan servicer. If the homeowner has responded to the servicer and receives no further communication or they end up in a circle of excess paperwork, then it is highly advisable to consult a foreclosure lawyer who has experience in dealing with servicers and lenders. Trying to find options and avoid foreclosure can be a stressful process.
Florida mortgage contracts usually have a clause that lenders refer to as a breach letter. They must to send out this notice letter before officially beginning the foreclosure proceedings. The letter will inform the homeowner of default, as well as any action need to resolve the default, and then a due date for this resolution. Lastly, the letter explains the consequences, if the default is not resolved by the due date, which is usually loan acceleration and property sale at foreclosure auction. The due date is usually about 30 calendar days from the day the letter is received by homeowner. If within that grace period the homeowner does not resolve the issue, the servicer usually hands the file to their attorney to start the foreclosure process.
Once the homeowner receives the breach letter and knows that they will not be able to resolve the default in the stated time period, they should contact a foreclosure attorney to ascertain the next steps. Sometimes this letter is not delivered and homeowners try to use it as evidence against the lender. Unfortunately, the contract does not stipulate that the letter should received by the homeowner, but that it is sent. If the lender proves that it complied with the mortgage clause in question and sent the letter, then for most courts that is acceptable as evidence to start a foreclosure.
Foreclosure Process in Florida
Florida is a judicial foreclosure state, which means that the lender has to file a lawsuit in order to foreclose on a property. They begin by filing a complaint in court, which is then officially served to the homeowner. Homeowner is given 20 days to return answer. If the homeowner does not reply in that time, then court delivers a default judgement in favoring the lender. The lender might also sue the junior lien holders, co-borrowers, or other parties with interest in the property. If the homeowner does deliver an answer in timely manner, then the lender can choose to either go to hearing or file affidavits supporting its position and refute anything the homeowner may have presented in defense. They might also file a motion for summary judgement, which is when the court rules in favor of lender if no evidence was brought to dispute the important facts from the borrower. The reason for this is that it usually ends a case faster without going to trial. Another reason these judgments are usually granted, because the homeowner basically has no defense or evidence to present in trial. Unless the homeowner brings strong evidence to excuse not paying their mortgage, the lender will win the motion and the final judgment will go against the homeowner. If the court does deny the lender’s motion for some reason, then the case goes to trial. If the homeowner loses the trial, then the final judgment of foreclosure will be approved by court.
If the motion for a summary judgement is rejected, then a foreclosure trial date will be set. There are a few different trial types for foreclosures In Florida. One of them is known as the bulk trial. This type of hearing sees several cases in a very short time. Most of the time the different parties come to agreements during this trial, or judgement is granted when one party does not appear. A more thorough approach does not work in this sort of trial. The other type of trial lasts longer with only one case in a given time frame. All parties can present their cases to the judge and go through all issues or defenses. Least often times cases are dismissed before the trial. If that’s the case the lenders usually re-file the case. If the final judgment is granted to lender, or with the summary judgement, then the court will set a sale date for the subject foreclosed property. Usually the sale date is 30 days from the final judgement date, but can be postponed up to 60 or even 90 days after the final judgement.
Foreclosure Sale at Auction
By law, the notice of foreclosure sale is required to be published in newspaper two weeks before the sale date. It must remain in the paper for the entire two weeks. The lender also should file a proof of publication or probably the court will not allow the sale to happen. Due to certain circumstances such as loan modification, short sale or bankruptcy, the foreclosure sale can be canceled or delayed. The sale typically takes place in an auction where the property is sold to the highest bidder. If the judgment amount is significant, the lender participates in the auction as a bidder to create competition and drive the bids higher. Bidders other than the lender are usually cash buyer investors and have to make a deposit with the court’s clerk before the sale to prove they have funds. Lender usually bids up to the judgment amount. If the property does not sell or the lender’s bid wins, it becomes an REO, or real estate owned, property. Now the lender owns it and will sell the property to a broader public. The homeowner has only 10 days to dispute the sale, after which, the court will confirm the sale and the title legally will be transferred to the buyer.
Another less possible scenario is when the total amount owed by the borrower exceeds the sale price of the property, the lender can pursue a deficiency judgement in some states. In Florida, the lender can do so separately from the foreclosure action, or as a part of it. The amount granted is up to the court and it cannot be more than the difference between fair market value of the property and the judgement.
In the rarest cases there is a bid in excess of the judgement amount rendered by the court, then the excess will first go to pay off any other lien holders on the house. Any remainder after these payments would then revert to the homeowner.
Once the title transfers to the new owner, then the homeowner is obligated to vacate the property. Lenders or new owners typically choose to proceed with one of two possible scenarios. One way is to offer what is known as a “cash for keys” deal. Simply put, the new owner offers the previous owner some funds to move out. The second option is to file an official eviction lawsuit. Eviction is usually worked into the foreclosure case and final judgement. Once the new title is issued, the new owner or lender might file a motion for writ of possession. This gives the old owner only 24 hours to vacate the house. The sheriff then posts the notice on the property to vacate. If the homeowner does not do so, then the sheriff is authorized to force them to leave.
Florida Expedited Foreclosure
The Florida foreclosure process as detailed above is extremely time consuming. It is one of the longest in the nation in average taking 895 days. However, Florida laws constitute rules for an expedited process, if the homeowner has no defense or does not take any action. That process follows the six steps detailed below.
1.When the foreclosure lawsuit is filed, any other lien holders can request an order showing any reason why the foreclosure action should not proceed.
- If no requests submitted the court makes sure the complaint is valid and meets certain criteria, and then they send an order to the homeowner to prove any reason why the final judgement of foreclosure should not be granted.
3.The court sets a date for the trial, which is usually about 20 days after the order requesting proof of defense. The homeowner needs to show a defense within 45 days the first foreclosure complaint.
4.Before the hearing, the homeowner can file a response to indicate any evidence in their defense.
5.The court will then hear the homeowner’s defense at the trial and if found legitimate, no final judgement will be granted at that point.
6.If the homeowner does not file any response, or does not show up at the hearing, or loses the hearing, then the court can immediately render a final judgement favoring the lender.
Sometimes this expedited process runs simultaneously with the standard foreclosure proceedings.