The Foreclosure Process for Mortgage Holders
A mortgage secures a home property loan by providing that the mortgage holder can sell the property if the mortgagor (borrower) is in default on the loan. There are specific requirements that mortgage holders must take to ensure that they follow the Florida laws on Florida foreclosures. Our seasoned real estate lawyers understand when and how mortgage holders can foreclose on loans in default so they can protect their financial interests.
What are the basic steps in the foreclosure process?
The main steps in the foreclosure process include the following steps. We’ll explain some of the specific requirements after this initial discussion:
- The borrower must be in default on the loan. Once the borrower misses a payment, the mortgage holder will notify the borrower of the missed payment. Many times, the borrower will pay the missed payment and a late fee to catch up. However, if the borrower’s financial fortunes have worsened, the mortgage holder may need to consider more formal actions.
- The pre-foreclosure period. Generally, a lender must wait at least 120 days before starting a formal foreclosure. In the interim, the lender must send default letters and discuss possible options such as loan modifications, repayment plans, forbearance, and short sales. During the pre-foreclosure period, the mortgage holder can charge late fees and inspection fees. The mortgage holder may also be able to charge for an appraisal and for any expenses to preserve the house if the debtor is not in possession of the home or is not taking proper care of the home. Generally, federal mortgage laws require that the mortgage holder (or mortgage service company) meet specific time limits for when they notify debtors about missed payments and when discussions about coming into compliance with the default can take place.
- Breach letters. Before filing a formal complaint the mortgage holder must send a breach letter to the debtor. This letter states that because the debtor is in default, the mortgage holder is demanding full payment of the mortgage. Generally, Florida does not provide a way for the lender to reinstate a loan after the breach letter is submitted. Some federally backed loans may be eligible for reinstatement.
- The formal notice of default. After 120 days the lender can file a formal civil complaint stating the debtor/homeowner is in default of the mortgage payments.
- The complaint, a summons, and a lis pendis are filed and publicly recorded.
- The defendant can file an answer to the complaint in foreclosure. If the debtor does not file an answer, the mortgage holder can request a summary judgment against the debtor/borrower. In Florida, the borrower normally has to file an answer within 20 days from the date of service of the complaint in foreclosure.
- A foreclosure trial. If the debtor files an answer or the summary judgment request is denied, there will be a hearing on the validity of the mortgage holder’s complaint. Generally, the mortgage holder, with the help of an experienced foreclosure lawyer will show that the borrower is in default and will respond to any defenses raised by the debtor.
- If the judge sides with the mortgage holder, the property will be scheduled for sale. When the sale is completed, the buyer will become the new owner and the new owner can proceed to evict the debtor from the home.
- Deficiency judgments. Mortgage holders may be able to seek a deficiency judgment if the amount of the sales price of the foreclosure is less than the amount of the mortgage balance.
The rights and duties of the mortgage holder
Generally, the mortgage holder must comply with specific federal and state laws that are designed to protect debtors. The mortgage holders are also bound by the terms of the loan/promissory note and the mortgage.
Debtors, in addition to loan modifications and short sales, may seek a loan consolidation. Some debtors may file for a Chapter 13 bankruptcy which allows the debtor to pay the amount in default over a three to five year period, provided the debtor continues making the future mortgage payments as they become due.
The Florida Foreclosure Process
In addition to the above requirements, a court may consider foreclosure mediation on a case-by-case basis.
If the foreclosure sale is approved, the mortgage holder must comply with the Florida judicial sales procedure process. This means the lender must:
- Publish a notice of the foreclosure sale in a newspaper – for two weeks in a row. The second publication date should be at least five days prior to the sale date.
- The sale should take place 20-35 days after the date of the judgment in foreclosure
- The foreclosure is a public auction.
- The mortgage holder generally bids the amount due on the mortgage including fees and costs.
- If the mortgage holder has the highest bid and bids less than the debt, the lender may be able to seek a deficiency judgment.
- If the highest bid is made by a third-party and there are excess proceeds (more than what is due to the mortgage holder), then the borrower should be entitled to this excess/surplus.
The local Florida court clerk generally files a certificate of sale within the next 24 hours. The sale should be confirmed if there are no objections within the next 10 days.
Can a mortgage holder fast-track or expedite the mortgage foreclosure process in Florida?
If a borrower doesn’t contest the foreclosure or doesn’t have a viable defense, the lender may be able to expedite the foreclosure process through a show-cause process set forth in Florida statute 702.10.
A few additional foreclosure considerations
Mortgage holders should review with experienced foreclosure lawyers in Indian River County the protections available to borrowers who are military personnel and through the right of redemption. In Florida, some borrowers may be able to redeem their property – after the foreclosure sale – if certain conditions are met.
Mortgage holders who wish to pursue a deficiency judgment against the borrower must comply with specific Florida statutes and requirements. There are short time limits for seeking a deficiency judgment.
Need to start a foreclosure action. Call our seasoned Indian River County real estate lawyers today
At Lulich & Attorneys, our Vero Beach and Sebastian lawyers understand the requirements for filing a foreclosure action. We’ll guide you through the process, ensure you comply with the formalities, and respond to any defenses raised by the borrower. To schedule an appointment, call us at 772-589-5500 or fill out our contact form.