Know Your Options When In Foreclosure

Understanding the foreclosure process in Florida

If you live in Florida and are dealing with the possibility of a foreclosure, you'll need sound information about the timelines, process, and even legal basis.

While a foreclosure can be an emotional, financially damaging, and even scary event in your life, avoiding the inevitable or staying unaware never helps.

You should also realize that the foreclosure laws are different to varying degrees from state to state, so the rules and timelines in Florida may be different than if you foreclose on a home in California, for instance.

While we’re not real estate attorneys, there are some set details and timelines that are clearly defined and accessible to everyone.

What you need to know about foreclosure in Florida

Florida’s foreclosure process can be complex from the outside looking in. But if you understand the different roles, when the courts get involved, how the legal process works, and the seminal dates involved, you (as a homeowner) have the best chance of making the best possible decision. That may include staying in the house as long as possible, your options to stop or delay foreclosure while you try to work out a resolution, and ways to still recapture money if you’re losing your home to foreclosure.

Additionally, you don’t want any nasty surprises such as a sheriff knocking on your door and saying you have to leave the premises!

But if you've just missed a few payments and you're facing the foreclosure process in Florida for the first time, you probably have a number of important questions.

Through our experience, these are the top 10 questions about foreclosure in Florida:

1. After a foreclosure starts, how long do I have before must leave the house?
2. Is there a way to stop or postpone my foreclosure in Florida?
3. What are the foreclosure timelines in Florida?
4. What are the steps to the foreclosure process?
5. Can me or someone I know buy the house back from the bank?
6. Will someone come evict me?
7. Will I still owe the bank after a foreclosure?
8. Is Florida a redemption state?
9. How will my credit score be affected by a foreclosure?
10. When will I be able to buy a house again?

The legal definition of foreclosure

Before we start answering those questions and providing you all of the information you need, let’s touch on a critical topic: the legal definition of foreclosure.

Since foreclosure is a legal process, we need to go right to the legal definition to anchor any further conversations.

When a lender takes back control of a property, they use a legal process that’s deliberated and executed in the courts, called ‘foreclosure.’ Through this legal process of foreclosure, the courts will gather information, offer a ruling, evict the homeowner, and sell the home once it’s vacant again. Of course, the foreclosure process starts because the homeowner missed mortgage payments, and the bank decides that their best recourse is to initiate a foreclosure and take back control of the property.

The courts and judicial foreclosure

From state to state, situation to situation, there are many aspects of the foreclosure process that are similar or even a mirror image. However, there is one potential difference that’s absolutely crucial to understand: whether your state is a judicial foreclosure state.

With judicial foreclosure states, any foreclosure proceeding must go through the court system. It’s worth noting that Florida is a judicial foreclosure state, which means all foreclosure cases must be filed and heard at the country court.

For anything to happen and the foreclosure to even get off the ground, the lender must file their foreclosure case at the appropriate county court (where the property is located). The foreclosure proceeding must be ruled on by a judge, and other aspects of the process (like valuation) are usually handled by official court representatives. Once the judge approves the foreclosure, it can proceed, and the legal action against the homeowner/mortgage holder only concludes when the home is repossessed and sold at public auction, with the proceeds going to the lender to compensate them for the outstanding mortgage debt.

While Florida is a state that uses judicial foreclosure, other states may have non-judicial foreclosures. But that's not possible in Florida per state law, so you can expect the courts to be involved every step of the way.

Florida is also a Lien Theory state

It’s also worth noting that Florida is what’s called a “lien theory” state.  That just means that when a homeowner purchases a dwelling and utilizes a mortgage, the property essentially belongs to that homeowner – not the bank or mortgager.

When the lender funds your mortgage, they file a lien on the property, which is a legal document filed at your country records office registering the amount you owe on the property (your mortgage) and your contracted promise to pay it back. The buyer/mortgage borrower is listed as the official owner on this lien, as well as on the property's deed and title.

While Florida is a Lien Theory state, many states outside of our sunshine state are actually “Title Theory” states instead, which means the bank officially owns the property until the homeowner pays off their mortgage in full.

Florida’s foreclosure statutes and laws

If you're a homeowner who missed a few payments and now facing an inevitable foreclosure, it's important that you're aware of the specific laws and statutes that dictate foreclosures here in Florida.

You may want to do a little reading on Florida’s laws, timelines, and the process for foreclosures, as well as talk to the appropriate court representatives or even hire a qualified real estate attorney.

But one thing we’d like to point out is that Florida has initiated a process called “Fast-Track Foreclosure.”

The aim of the Fast-Track Foreclosure program is to limit homeowner rights that are going through foreclosure and expedite the judicial foreclosure process, speeding the court's ruling, eviction, and sale of the property so lenders can recoup their money as soon as possible

With Fast-Track Foreclosure, mortgage companies or servicers only need to file a “show cause order” in court as soon as the foreclosure case has been filed. With that filing, the show cause order puts the onus of defense and the burden of proof on the homeowner/mortgage holder, who now must demonstrate in court any legitimate reason why the bank shouldn’t be able to take back the property.

Of course, few homeowners can or do provide that proof and mount a successful defense, so the end result is that foreclosures speed quickly through the judicial process in Florida.

Here is a summary of a few other key legal points you should understand when it comes to foreclosure in Florida:

• Judicial Foreclosure? Yes
• Non-Judicial Foreclosure? Not Available
• The bank lien is secured by… the mortgage
• Typical foreclosure timeline: 180 Days
• Equitable Right of Redemption? Yes
• Statutory Right of Redemption? Yes
• Possible Deficiency Judgment? Yes

It’s worth repeating that homeowners would be wise to consult a local foreclosure or real estate attorney if they have questions, want to learn their options for delaying the foreclosure or work out a solution to save your property.

Foreclosure timelines in Florida

Maybe you've missed a payment or two and are wondering what will happen next. Or, you may have just lost your job, are facing a big medical problem, or even got divorced and see the writing on the wall that you won't be able to keep making your mortgage payment.

Whatever reason you failed to write a check to your lender on the first of the month, you're probably interested in the timelines of the foreclosure process.

“How long will I be able to stay in my house before the bank takes it back?” is a common question for people facing foreclosure, so we’ll go over the timelines here.

With this knowledge, you’ll know your options and be ready to make the best of it or try to save your home from foreclosure, even though it’s a scary time.

There are three main stages to foreclosures in Florida; pre-foreclosure, the foreclosure lawsuit, and the sale after the foreclosure.

The three stages to the Florida foreclosure timeline:

Pre-Foreclosure:

This stage extends from the first time a homeowner misses their mortgage payment until the mortgage lender files a foreclosure lawsuit – usually initiated with a Notice of Default – in court.

Foreclosure court action:

Once the lender files a foreclosure lawsuit in court, the foreclosure stage is underway, culminating when the court allows a foreclosure sale.

Post-Foreclosure or After Foreclosure:

Once the court rules and the foreclosure sale proceeds, the timeline starts for rights of redemption, the eviction process, and possible deficiency judgments.

Now, let’s look closely at each individual step to these three phases:

Pre-foreclosure

Well before there’s a court sale, eviction, or even foreclosure judgment by the courts, the whole process starts with the pre-foreclosure period.

In Florida, pre-foreclosure begins the moment you miss your mortgage payment and lasts until the actual foreclosure lawsuit commences. That runs a minimum of 120-days from the missed payment to foreclosure lawsuit in Florida, as that timing is mandated by the Dodd-Frank Act.

But while 120 days may be the minimum, the pre-foreclosure timeline is often extended or delayed, especially if the homeowner is trying to work out some solution or arrangement with the bank that will avoid foreclosure. In fact, you should contact the bank as soon as you miss a payment or are unable to pay on time, as communication throughout the process is paramount and can only benefit you, the homeowner.

For more information about pre-foreclosure, click here. [Anish – insert link to our pre-foreclosure article]

It all starts with that first missed payment

Of course, this all starts when a homeowner fails to submit their monthly mortgage payment, setting off a chain of events that usually ends in foreclosure, if not some sort of solution like a short sale, conventional sale, loan modification, or deed in lieu of foreclosure.

When you miss your mortgage payment (usually due on the 1^st of the month), you may have a 15-day grace period in Florida before it's officially considered late. Once that grace period has expired, you'll start being charged late fees – usually about 5 percent of the sum of the payment that was due that month.

So, if your mortgage payment is $1,000, you might be charged around $50 for a late fee. Those late fees will keep mounting and adding up the longer you go without paying as the months go on.

The 30-day past due point

After 30 days since you missed your first mortgage payment, your mortgage company or servicer will report the late payment to the credit bureaus. That 30-day late will reflect on your credit report, which will start negatively affecting your score.

Your lender’s aggressive attempts to contact you before foreclosure

Once you are 30-days late, your lender will also step up their efforts to contact you via phone and mail, strongly urging you to make payments immediately! In fact, according to federal collection laws, your mortgage bank must contact you no later than 36 days after your first missed payment.

In fact, once a borrower misses their payment, the mortgage lender or servicer must contact the borrower no later than that 36-days point. The lender or servicer is also required to share appropriate options and resources for getting the borrower current again or avoiding a foreclosure with the help of a loan modification, short sale, or deed in lieu of foreclosure.

Once your mortgage payment reaches the 45-day late mark, your lender or servicer is required to assign their Loss Mitigation personnel to your case. This Loss Mitigation Specialist will work with the borrower to fill out any needed applications, offer information and options, and review the financial documents necessary.

Your lender or servicer has 30 days to go through your loss mitigation choices and resources, covering your options and seeing which you’re eligible for. They will also update you on the progress of your applications, what options are still available if an application is denied, and also when missed payments will mount to the point when the lender will file a foreclosure lawsuit in Florida.

That Loss Mitigation Specialist will be available to talk to the borrower by phone and act as a counselor and guide for what happens next.

120-days past due mark

Once you are 120 days late, the bank can file a foreclosure action against you in court, officially ending the pre-foreclosure period once they do. The requirement that the bank needs to wait 120 days after you miss a payment to file is mandated by the Dodd-Frank Act, as well as the Consumer Financial Protection Bureau (CFPB).

This 120-day loss mitigation period is outlined in statute 12 CFR Part 1024 (Regulation X) of the Dodd-Frank Act:

“Pre-foreclosure review period. A servicer shall not make the first notice or filing required by applicable law for any judicial or non-judicial foreclosure process unless: (i) A borrower’s mortgage loan obligation is more than 120 days delinquent; (ii) The foreclosure is based on a borrower’s violation of a due-on-sale clause; or (iii) The servicer is joining the foreclosure action of a superior or subordinate lienholder.”

Of course, that 120-day mark is just the minimum time required for a lender to file the foreclosure lawsuit, but it may take longer. If a borrower is communicating with the Loss Mitigation department and trying to work out a solution, we often see the lender postpone a foreclosure action for months.

Outlining the foreclosure lawsuit

Step 1: Filing the Summons, Complaint, and Lis Pendens

The whole process of foreclosure officially starts in Florida with a foreclosure lawsuit, kicked off when your lender files a Summons, Complaint, and Lis Pendens.

The Summons

To put it simply, the Summons is just a legal notification that the foreclosure lawsuit is being filed, and requests your appearance in front of the foreclosure court at a specified date and time. Additionally, the Summons offers a certain time frame for you to respond.

A Summons will be issued for each and every defendant in the Complaint, which means in foreclosure actions that each borrower on the mortgage will be named, as well as other owners and lien holders.

The Complaint

The court will also issue a Complaint, which is the formal legal groundwork for the foreclosure lawsuit that’s being filed. The Complaint includes the mortgage, the promissory note, details about the property in question, and the balances that are due. These are referred to as exhibits, or just written copies submitted to the court. The bank will also outline what relief they’re requesting, which is most likely a foreclosure sale where the proceeds will be used by the bank to pay off outstanding mortgage balances, whether in full or partially satisfying the mortgage debt.

Lis Pendens

Although the term “Lis Pendens” may be unfamiliar to most people, it’s simply just a written document notifying the public that a foreclosure lawsuit was filed against their property. The Liz Pendens must be filed with the local county court according to Florida’s statue 48:23, which says:

“An action in any of the state or federal courts in this state operates as a lis pendens on any real or personal property involved therein or to be affected thereby only if a notice of lis pendens is recorded in the official records of the county where the property is located.”

Serving the Summons and Complaint (10 to 20 days)

Pursuant to Florida state law, the lender or servicer is required to formally serve you notice of the foreclosure lawsuit with the Complaint, Summons, and Lis Pendens. According to Florida Rule 1.070, the service of the Summons and Complaint must include the clerk or judge’s signature, the seal of the court, and be served personally by an officer of the court, a law enforcement officer, or someone else whose been appointed by the court. The service usually takes 10-20 days depending on several factors and timing.

Step 2: Answer (20 days)

Once the lender officially serves the Summons and Complaint to the homeowner, Florida law offers a 20-day period when the defendant to the new legal action can file a response in court, which is known as the Answer. Within the Answer, the homeowner responds to the information filed within the Complaint. The Answer will either admit the circumstances of the legal action, deny them, or state that the facts laid out are not backed up by sufficient evidence and factual basis.

Therefore, the Answer allows the mortgage holder to mount a legal defense based on circumstances or facts. Once the Answer has been filed with the court, the next step of the foreclosure process is that a Preliminary Hearing will be set.

Step 3: Preliminary Hearing

Once you submit your Answer, a Preliminary Hearing is scheduled, which is the next step in the foreclosure timeline in Florida.

In some cases, the county court may ask that your mortgage lender gives you some time to work out a solution to your missed payment dilemma, hoping to avoid a foreclosure. But in most cases, the court deems your Answer as insufficient at the Preliminary Hearing, and they will proceed with the foreclosure.

And if you didn’t submit your Answer within the allowable 20 days, the court may resort to Florida’s Fast Track foreclosure process. In that case, they may proceed with the Summary Judgment in less than 30 days.

Step 4: Summary Judgment Hearing

Typically around the 45-day mark, the summary judgment hearing will take place. In this hearing, the lender or mortgage servicer makes their case in county court, hoping to receive a legal ruling in their favor.

At the Summary Judgment Hearing, it’s the homeowner’s opportunity to make a case against the lender’s lineup of evidence, challenging any disputed facts.

The mortgage lender’s attorney will respond by displaying proof, facts, and evidence showing that the foreclosure should resume. This is also a point when the lender can clarify or submit update financial calculations, including the balance of the mortgage due, accrued interest, late fees, penalties, and even legal fees.

Once the Summary Judgment Hearing has concluded, the court can rule that the foreclosure can proceed.

Step 5: Foreclosure sale date

Once we reach the 75 days or so after the initial foreclosure suit filing, the court will proceed with the foreclosure sale. Of course, this is assuming that the Summary Judgment Hearing ruling was in favor of the mortgage lender, and the local county can auction off the house in question.

Step 6: Rights of Redemption

Even though the home was sold at public auction, Florida state law allows a statutory right of redemption. That means the (former) homeowner still has an opportunity to legally “redeem” the property. This can take place during the foreclosure using Florida’s Equitable Right of Redemption law or the Statutory Right of Redemption post-foreclosure sale.

According to Florida statute 45.0135:

“At any time before the later of the filing of a certificate of sale by the clerk of the court or the time specified in the judgment of foreclosure, the mortgagor may cure the mortgagor’s indebtedness and prevent a foreclosure sale by paying the amount of moneys specified in the judgment, or if no judgment has been rendered, by tendering the performance due under the security agreement, including any amounts due because of the exercise of a right to accelerate, plus the reasonable expenses of proceeding to foreclosure incurred to the time of tender, including reasonable attorney’s fees of the creditor.”

In reality, this doesn’t often happen, as the property owner would need to come up with the amount they originally borrowed when they bought the property (or the present balance if there was a refinance), plus any interest, costs, legal fees, etc. that have accrued.

Evicting the former homeowner once the foreclosure is complete

Now the bank officially owns the bank or has sold it to another party, but the original homeowner may still be living in the premises. So, the lender will want to get them out so they can reclaim the property, and that’s when a legal eviction proceeds.

Once the foreclosure issuance, the lender will probably file a motion for writ of possession, which grants legal ownership of possession to them. The local sheriff will then be enlisted to go out to the property and post that writ, including a short timeframe when the habitants must vacate – or risk being forcibly removed by the sheriff.

Remember that Florida is a Deficiency Judgment state!

The foreclosure is finalized, the home sold, and the former owner is out and not in possession of the home anymore. But the foreclosure process still can't be considered at rest, since Florida is a Deficiency Judgment state!

A Deficiency Judgment is an amount that the bank looks to recover based on the difference between the mortgage balance that was owed to them (plus interest, fees, etc.), and the amount they actually recovered once they repossessed and sold the property.

In Florida, that means the lender has up to one year to file a motion in court to proceed with that Deficiency Judgment, which is still a legally collectible debt even after a homeowner lost the home!

That’s exactly why it’s always a good idea to work with your lender during the foreclosure process, trying to work out a short sale or even deed in lieu of foreclosure so the matter will be settled, and the lender won’t proceed with a Deficiency Judgment post-foreclosure sale.

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The foreclosure process in Florida can be complex and adheres to specific statutes and timelines, so we recommend you consult a real estate attorney or foreclosure expert if you’re even missing a payment and starting the process.