Just three weeks into his presidency, Barack Obama traveled to Fort Myers, FL, highlighting the country’s foreclosure crisis. The NY Times has featured Lee County, FL foreclosures on its front page. The rate of foreclosures in southwest Florida was the highest in the nation in 2008. The way Florida law works has national import.
Foreclosure Defined
When someone borrows money to buy a home, two documents define the borrower’s obligations to repay the money. One is a mortgage, making the real estate security for the loan. The second is a note, making the borrower personally liable if the value of the real estate is not sufficient to cover the loan. The terms of repayment of the loan are defined in these two documents.
If the borrower does not make the payments agreed to in the documents, then the lender may go to court, and request that the property be sold to satisfy the debt. The process of getting a court order and having the property sold is the foreclosure process.
Starting the Foreclosure Process in Florida
The foreclosure process in Florida is referred to as an action in equity. Equity gives a judge authority to do what is fair. The first step is for a lender to file a lawsuit and what is known as a lis pendens.
A lis pendens creates a public record of a lawsuit pending that may affect the title of property. Persons interested in the property can check public records to determine status of title.
Florida Foreclosures are Court Proceedings
Foreclosures are carried out through court proceedings. If a lender finds that a homeowner is in default on their mortgage payment and the two parties are unable to resolve the issue of outstanding debt, then the lender has the right to file a lawsuit against the homeowner. The foreclosure action provides the court with information regarding an alleged default in mortgage payments by the homeowner.
The lender is not required to notify the homeowner prior to filing a foreclosure action, although individual mortgage contracts or trust deeds may have such a requirement. Once the action is filed, the court makes determinations regarding the lender’s complaint. If the complaint is verified (sworn to under oath), and states a cause of action, upon the lender’s request the court orders the homeowner to show cause why the property should not be sold to satisfy the debt.
The homeowner is notified of the pending legal action and must file a timely answer. If the homeowner responds and contests the foreclosure, it may take an extended period. If the homeowner does not respond, the court will enter judgment against the homeowner and set an auction date.
Equitable Right of Redemption
Before the sale, the homeowner may redeem the property by paying the outstanding loan balance and costs. If there is no redemption, a sale proceeds with public notice. Florida foreclosure law states that the notice of sale shall be published at least 3 consecutive weeks, the last such notice not less than 5 days prior to the sale.
Within 10 days of the sale, the clerk transfers ownership to the winning bidder if no one disputes the sale. In most instances, a borrower has no right of redemption after the certificate of sale is issued. If the sale does not cover the entire value of the mortgage, the lender may sue for a deficiency judgment.
Alternatives to Foreclosure
There are possible alternatives to a foreclosure sale, and should be investigated with competent legal counsel. They can be explored prior to the filing of a foreclosure when the homeowner foresees a problem or may be negotiated with the lender during the foreclosure process. These include:
- Repayment Plan
- Redemption/Refinance
- Home Sale/Short Payoff
- Loan Modification
- Bankruptcy
- Deed-in-Lieu of Foreclosure
 |
 |
