Most homebuyers cannot afford to pay for their homes. Instead, they purchase their home by taking out a loan. To secure the loan, creditors require that the home buyer sign two documents.
- The first is a payment note which lists the amount of the loan and the payment terms.
- The second document is the mortgage. A mortgage is a document that protects the company or person providing the loan – the creditor. The mortgage is a security interest for the loan. This means that if the buyer defaults on the loan, the holder of the mortgage has the right to begin a foreclosure action. In foreclosure, the lender can seek the right to sell the home.
According to statista.com, nearly one in two hundred homes was in foreclosure in 2018.
Initial default
Homeowners generally are charged a late fee if they are behind in any one month. Failure to pay beyond the grace period may place the loan in default.
Federal and state regulations
There are federal and Florida laws that protect homeowners from early foreclosure process actions. Generally, federal law requires that the mortgagee, person, or company that can seek possession of the home, must wait 120 days before they can start formal foreclosure proceedings. During this time, the creditor should take certain steps to protect their interest. They should also communicate fairly with the debtor. Creditors should review these steps and the foreclosure process with an experienced Florida real estate lawyer. Failure to follow the correct procedures can delay or even void any foreclosure actions.
The Default/Breach letter
In Florida, mortgages generally require that the creditor send the homeowner a breach letter. This letter informs the homeowner that:
- The loan is in default
- The homeowner has at least 30 days to cure the default. This means time to pay what is due plus any interest and costs.
- That if the debt is not cured, the creditor may proceed to enforce the debt.
- Typically, creditors wait about 90 days before sending out the default/breach letter.
The court foreclosure process
A mortgagor cannot simply take possession of the home by changing the locks or taking any direct action. The creditor (plaintiff) must file a formal foreclosure action in the court for the county where the property is. The legal process begins with the filing of a complaint and serving it on the borrower. The lawsuit should also inform, by summons, that that the borrower has 20 days to file an answer or the lender may ask for a default judgment and enter a final foreclosure judgment.
Florida’s expedited foreclosure process
Then the lender can seek a rule to show cause as to why the foreclosure actions should not proceed. If the borrower doesn’t answer or doesn’t have a valid answer, then the court can schedule a foreclosure sale within a 20-35 day period after the judgment – unless there is some other agreement or a bankruptcy filing.
How the foreclosure sale process works
The lender must arrange to have a notice of the sale published in a local newspaper for two weeks in a row. The second notice publication should be more than five days from the sale date. This is to give the borrower some fair chance of getting the most money possible through the foreclosure sale.
At the sale, the highest bidder is entitled to the property provided payment is made. Lenders do have some rights to make credit bids to protect against someone bidding an amount significantly below what is due.
After-sale certificates
Shortly after the foreclosure sale, the court files a certificate of sale. The borrower then has ten days to object to the bid or the sale is confirmed and the bidder can obtain a certificate of title to the real estate.
If the amount obtained at the foreclosure sale is less than the amount of the debt, then the borrower can seek to obtain a deficiency judgment according to Florida law. The court does have some authority to set the amount of the deficiency judgment based on the property’s fair market value (often more than the foreclosure sale price) and the amount due.
What happens after the foreclosure sale
The holder of the title to the property can seek to evict any borrower who doesn’t or didn’t previously vacate the property. Essentially, the holder of the certificate of title will file a motion for a writ of possession.
Recent changes to foreclosure law
In 2013, some changes to Florida’s foreclosure laws were made. The changes included the following:
The ability to fast-track/expedite a foreclosure was made easier, The right to fast-track the foreclosure can now be filed by any lienholder. For example, a condo or homeowners’ association can request that there be a fast-track procedure. Borrowers will have less time to try to pay off the loan through a loan modification, short sale, or even a deed-in-lieu of foreclosure.
Additional changes
The ability of a debtor to get a home back after the foreclosure was made more difficult. A lender must verify the promissory note when filing the foreclosure complaint
The time frame for obtaining a deficiency judgment was shortened