The Miami Herald reported last year that one in every 1,180 Florida housing units was subject to a bank warning. The warning was that late payments may lead to Florida foreclosure actions. Most Florida home buyers purchase their home, condo, duplex, or residence by obtaining a loan. Banks and mortgage lending companies are the primary loan source. The buyer then signs two key documents:
- A promissory note. This document requires that the buyer pay back the home loan. The terms of the loan payment such as interest rate, the amount of each monthly payment, and the number of months due are outlined in the note. The note should also state what actions the lender can take if the borrower fails to make timely payments.
- The mortgage. This document requires that the buyer give the home as security or collateral for the loan. It means that if the buyer defaults on the loan, the lender can take possession of the home if the proper state and federal laws are followed. The lender can then arrange to sell the home and use the proceeds of the sale to pay down or pay off the balance due.
In some cases, the seller loans the money to the buyer in return for a mortgage agreement. The seller can be the original developer of the property. The seller can also be an existing homeowner. In some cases, the buyer may assume the balance of the seller’s mortgage. This type of transaction is called a purchase money mortgage. The foreclosure rules are generally the same as for a home purchase through a loan company or bank.
Often, a service company that is different from the actual owner collects the funds that are due.
Missing the first payment
Promissory notes and payments due through a purchase money mortgage are due on a predetermined date of the month – outlined in the note or contracts. Usually, the homeowner will be given a grace period to pay the amount that is due. A late fee of either a specific amount or a percentage of the payment due will also be due.
If the homeowner fails to make a payment within the grace period, then the loan servicer or owner of the note should contact the homeowner by mail, phone, or email to find out when a payment can be expected. The loan company or promissory mortgage holder will also review whether future payments will be timely – or if there is a problem.
Required steps if the payments are 30 days late or multiple payments are due
If the account is more than 30 days late, then the loan servicer will normally take the following steps:
- They will notify credit reporting agencies that the loan is in default
- They will continue to try to work with the homeowner to establish payment arrangements for the amount in arrears
Steps after 120 days of delinquency have passed
The Consumer Financial Protection Bureau requires that loan services wait at least 120 days before beginning the formal foreclosure process. Typically, the loan servicer will send out payments detailing the amount that is due and explaining what opportunities such as loan refinancing may be available. The lender may also be notified by a lawyer for the homeowner that the homeowner is considering all possible options.
The Breach Letter
In Florida, lenders, including promissory noteholders and purchase money security interest holders, must send out a formal letter called a breach letter – after the 120 day period has expired but before they begin the formal Florida foreclosure process. The lender should take steps to ensure that the lender receives the letter – such as personal service of the letter or requiring a signature for the letter. The breach letter should:
- Inform the homeowner that he/she is in default.
- Explain what the homeowner needs to correct the default.
- Give the homeowner a specific due date (normally 30 days from the date of the letter) to cure the default.
After the due date expires, the lender will then have the right to begin the formal Florida foreclosure process.
Beginning the formal foreclosure process
In Florida, the standard mortgage holder or purchase money mortgage holder must file a formal complaint in foreclosure in the court where the property is located. The complaint must be served on the homeowner along with a notice. The notice says that the homeowner has 20 days from the date of service to file an answer to the complaint. If an answer isn’t filed in 20 days, the lender can request that a default judgment be entered against the homeowner.
The lender may also be required to file complaints against any junior mortgage holders, any lienholders, and any co-borrowers to protect their interest. This is to make sure that the home can be sold and that the lender will be paid first when the home is sold.
If the homeowner does file an answer, the lender can seek a trial on the complaint. It may also file affidavits in support of its claim. In many cases, the lender will file a motion for summary judgment unless there is some evidence that payments have indeed been made or that there is some legitimate defense. Homeowners can just file any answer to stall for time.
Disclosure and trial
If the motion for summary judgment is denied, then the compliant in foreclosure will be tried before a judge.
In Florida, either side (the lender or the homeowner) can request discovery before a motion for summary judgment (or before trial). Here, both sides are required to answer questions at depositions, provide documents, and comply with other legitimate requests for information. Discovery is generally not used in Florida foreclosure proceedings because the amount that is due is often clear.
The Florida Trial in Foreclosure
Once discovery is complete, the lender can request that the court set a date for trial. At the trial, both sides present their case. If the court finds in favor of the lender, as is often the case, if the lender has an experienced Sebastian and Vero Beach real estate lawyers – the court will then set a date for the sale of the property.
The foreclosure sale – initial steps
Fla. Stat. § 45.031 governs the Florida mortgage foreclosure process.
The main aim of the Florida foreclosure sale is to get enough funds to be able to pay off the loan plus any related expenses. In Florida, the lender generally publishes a notice of the sale in the local newspapers two weeks before the date of the sale. The notice must continue for the full two weeks.
The lender must file a “proof of publication” that the notice did appear in the newspaper.
In some cases, the sale may be canceled or delayed. The most common reason for cancellation is that the homeowner files a Chapter 7 or a Chapter 13 bankruptcy.
The foreclosure sale
The sale is usually done by auction. The highest bidder wins the right to buy the property. In some cases, the lender may buy the property so it can fix it up and sell it to a new homebuyer. If the bidder is not a lender, the bidder must deposit the bid amount with the court. Bidders normally can bid up the price – up to the amount that is due. If there are no third-party bids, the property reverts to the lender.
Generally, the homeowner can file an objection to buying another 10 days to try to come up with the funds due.
The second consideration in foreclosure sales is whether there should be a deficiency judgment. If the sale price isn’t enough to pay the amount that is due, then the balance (what is due minus what is bid and paid) is still due. The lender can then, with the help of legal counsel seek a deficiency judgment for the balance due. The judge does have discretion regarding whether there should be a deficiency judgment and the amount of the deficiency.
If the bid is more than what is due, then the excess amount is paid to any other mortgage holders or lien holders.
Additional considerations – evictions
If the homeowner refuses to leave the property, then the lender or whoever buys the home can seek to remove the homeowner by eviction or by agreement (such as a cash offer).
Ways to expedite the Florida foreclosure process
Florida does permit an expedited foreclosure process. The main requirements are:
- The lender/purchase money mortgage holder requests an order be entered in which the homeowner must show why the foreclosure shouldn’t proceed.
- The court then sets a hearing date
- If the homeowner can’t provide a valid defense or doesn’t contest the show cause order, the court can enter a final order in favor of the lender.
Some defenses homebuyers assert include arguing that the lender did not make reasonable efforts to try to resolve the claim, did not follow the statutory requirements and that the lending practices were illegal.
For help filing a foreclosure claim, call the experienced Florida real estate lawyers at Lulich Attorneys & Consultants. You can call us at 772-589-5500 in Sebastian, at 772-7747-7771 in Vero Beach or you can complete our online contact form.