If your lender has filed a foreclosure action against you or you are in default on your home mortgage loan, you probably have many concerns and questions about how the foreclosure process works. Sections 702.01 through 702.11 and 45.031 and 45.0315 of Florida’s Statutes set forth the fundamental principles of Florida’s foreclosure law. Here is a brief overview:
Judicial Foreclosure Only
Florida law requires all foreclosure actions to go through the courts. This way, the borrower has an opportunity to contest the foreclosure action before a neutral magistrate. Also, the sale is supervised by the court, so the lender will not unjustly profit from it.
Because there are multiple steps in the judicial foreclosure process, the duration of an uncontested foreclosure action in Florida is approximately 6 months. If the borrower has a skillful attorney to contest the foreclosure, however, the process can be slowed down significantly.
Foreclosure in Equity
In Florida, all mortgages are foreclosed in equity. This means that the court considers the case according to principles of equity, such as fairness and justice, as well as legal rules. For example, the judge has broad discretion to halt or slow down the proceedings upon request by a borrower who produces evidence he is trying to work things out with the lender. If the court grants a trial on the foreclosure claim, it will be tried by a judge (not a jury).
A valid foreclosure action is based on 2 documents: a promissory note and a mortgage. In the promissory note, the borrower agrees to pay the lender back the principal borrowed plus interest. In the mortgage, the borrower pledges the property he is financing as collateral for the loan. Thus, the note creates the obligation upon which the foreclosure action is based, while the mortgage gives the lender the right to take the borrower’s property in case of default. It is possible for a lender to foreclose on a property (when not protected by a homestead exemption) when the borrower has executed a promissory note but no mortgage!
Foreclosure Suit Timeline
Once a borrower defaults, the lender will typically send him a notice of default, in which it demands the entire principal balance of the loan. A lender is not allowed to accelerate the loan (declare the entire amount due) until payment is at least 30 days past due.
A. Filing of the Complaint
In the complaint the lender makes a request that the court grant it a foreclosure and states the facts and law that support its request. The lender gives notice to the borrower of the lawsuit by serving him with a summons and the complaint. At this time, The lender also usually files a lis pendens, a document that states that it is in the process of suing the borrower. The lender then records the lis pendens at the county recorder’s office, putting the borrower’s other creditors on notice that it is seeking to foreclose the property.
B. The Answer
Borrower is required to file a response within 20 days of being served with the complaint in which he denies or affirms the lender’s allegations and asserts any affirmative defenses he may have. It is extremely important for the borrower or his attorney to file a timely answer to the initial complaint. If the borrower fails to answer the complaint, the borrower waives most defenses to the foreclosure suit, and the foreclosing lender may obtain a default judgment against him.
In his answer, the borrower denies or affirms each allegation in the complaint and raises any affirmative defenses he may have. Once the borrower has filed his answer, the Court sets a date for a hearing. At this hearing, the borrower and his attorney have a chance to state to the court the reasons the foreclosure should not proceed.
C. The Preliminary Hearing
At the preliminary hearing, the borrower states his defenses and identifies defects in the lender’s case. The judge then decides what happens next. If the borrower’s arguments have legal merit, the judge may grant him time to work things out with the lender by issuing a stay, or even dismiss the case altogether. If his answer is not sufficient, the judge will allow the foreclosure to proceed.
D. Summary Judgment Hearing
If the judge doesn’t stay the foreclosure proceedings at the preliminary hearing, the lender may proceed to seek a summary judgment of foreclosure. By filing a motion for summary judgment, the lender asserts that there are no remaining material factual issues in the case and asks the court to grant it a judgment without holding a trial. Instead, the court would hold a brief hearing to consider whether granting summary judgment is appropriate.
After hearing testimony from both sides at the hearing, the judge makes a ruling. If the lender’s attorney convinces him that his case is solid, the judge issues a final summary judgment of foreclosure. The judgment states the total amount of money that the borrower owes including the loan amount, interest, expenses, and attorney fees.
In uncontested foreclosure cases, courts routinely grant summary judgment since the lender has already produced evidence to support its foreclosure case with its complaint (such as copies of the note and the mortgage). This evidence, however, is often legally inadequate. It is up to the borrower and his attorney to identify the problems with the lender’s documentation and raise these issues at the hearing (the court will not examine these issues on its own). If there are serious evidentiary problems such as a lost note, the court may dismiss the case or schedule a trial to determine whether the foreclosure should go forward.
E. Foreclosure Sale
After the final judgment is entered, the Court schedules a foreclosure sale 30 to 60 days later. The sale, typically an auction, is directly supervised by the court. To ensure that the sale is fair, the lender is required to advertise the sale to the public by publishing legal notices in advance in local newspapers.
In Florida, the borrower threatened with foreclosure has an “equitable right of redemption.” This means that the borrower can redeem the property (avoid the sale) by paying the lender the judgment amount plus post-judgment interest prior to the confirmation of the property sale. The sale is confirmed by the clerk issuing a certificate of title to the buyer 10 days after the sale. The judge may also allow junior lien-holders to redeem the property by satisfying the final judgment.
Florida allows the lender to obtain a deficiency judgment against a borrower after the foreclosure. A deficiency occurs when the final judgment amount exceeds the “fair market value” of the property (as measured by sales of comparable properties contemporaneous with the foreclosure sale).
Federal Law on Foreclosure
There are several federal laws and regulations such as RESPA, the Real Estate Settlement Procedures Act, that provide important protections for homeowners facing foreclosure. RESPA’s provisions apply in all states and to all institutional lenders.
RESPA requires all loan servicers to inform borrowers that loss mitigation options are available that may avoid foreclosure. These options includereinstatement, loan modification, and short sale. RESPA also prohibits the loan servicer from initiating a foreclosure action during the first several months after a borrower’s default. Furthermore, if the borrower submits a timely and complete application for loss mitigation, the prohibition is extended until such time as the lender evaluates the application and notifies the borrower of its decision.
How a Real Estate Attorney Can Help You
Why do you need a Florida real estate attorney to assist you in fighting your foreclosure?
Based on what you have read above, you probably have gathered that the foreclosure process is complicated. A competent attorney can assist you by asserting your strongest defenses against the foreclosure suit. Contesting a foreclosure can dramatically slow down the clock. This can be crucial if the you are applying for a loan modification, seeking a short sale, or other foreclosure alternative, or just need time to plan for the future. Also, if the lender files a foreclosure based on lost documentation, a competent attorney may be able to get the court to dismiss the case outright.
If you are facing foreclosure, contact me for a free, no-obligation 20 minute consultation. I will review your case and explain all your options!
Clarke Law PA
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