The foreclosure process in Florida over the past 5 years has turned into a very slow, time consuming process with most foreclosures taking over 12 months to complete. The main culprit for this judicial slowdown was the “robo-signing” scandal involving the Law Offices of David Stern.
Robo-signing is when a foreclosure law firm or possibly even a title company, sign affidavits and notarize documents stating the borrower agreed to certain terms or conditions when in reality, the borrower did not sign the document. This brings into validity the legality of the mortgage (lien) on the property and therefore if the court rules the mortgage is invalid, the borrower can not be in default on it and the foreclosure judgment is denied. This, in some cases, has turned into a windfall for the homeowners as they have suddenly found themselves owning their property free and clear.
The foreclosure process in Florida starts when a borrower (also known as a mortgagor) has defaulted on his loan payments for 90 consecutive days. Many lenders will wait longer to start the process in the hopes of coming to a non judicial resolution with the borrower but the 90 days is the normal starting point
Most loans go into default because the homeowner has suffered some sort of financial catastrophe such as an injury that prevents work, divorce, complete loss of employment, a cut in hours or salary, etc. The foreclosure process is the means by which the lending institution can put in a claim for their collateral for the loan they made to the borrower (the property) in the hopes of recouping all or some of their investment.
Florida is a judicial foreclosure state which means all foreclosure actions must go through the court system and all foreclosure judgments must be issued by a Judge. The steps of the foreclosure process are as follow:
1. Notice of Default
This is a letter sent by the lender to the borrower in conformance with the terms written in the mortgage document letting the borrower know they are currently in default on their loan and requesting the borrower contact the lender to rectify the default. This is not a judicial action. It is simply a letter between the lender and borrower. Nothing has yet been filed with the court.
2. Lis Pendens
This is a document that is filed with the Clerk of the Court letting the entire world know there is a “potential” lien against this property. This is so anyone who attempts to buy the property and runs a title search will know there is a potential lien which must be satisfied before clean title can be given. This is still not the beginning of the judicial foreclosure proceeding. It is just a filing in the public records of the county where the property resides.
3. Summons and Complaint
This is the actual judicial document which starts the foreclosure process. The summons is a notice to the borrower that they are being sued by their lender for default. It must be personally served on the borrower. If the borrower can not be found then it must be mailed to the last known address of the borrower and posted in the property newspaper. Mailing the summons and posting it in the newspaper is known as “constructive” service of process, meaning while the person was not physically served with the document, every attempt has been made to notify them of the pending litigation. The complaint is the actual body of the lawsuit. It states who the parties are, which court has jurisdiction over the matter, and in detail describes the reasons why the borrower is in default and asks for the court to grant a foreclosure judgment. The borrower has 20 days to answer the complaint or they are considered in default and the court can grant a summary judgment against them in favor of the lender.
4. Foreclosure Judgment
This is the document which grants the lenders motion for foreclosure and sets up a date in the future (normally 30 days) when the property will be sold at a public auction. It is important to note that throughout the entire foreclosure process in Florida, the borrower has the right of redemption.
This is the borrowers right to “redeem” the loan meaning if at any point up until the actual sale of the property they are able to come up with the money to pay the lender then they are allowed to do so and the foreclosure judgment is declared null and void. The borrower retains possession of their home and the loan terms stated in the Note and Mortgage go back into effect. Payments must be made again by the borrower on time and in full or the lender can ask the court for an expedited judgment of foreclosure based on the borrowers previous default.
6. Sherriff’s Sale
This is the actual foreclosure auction, normally occurring at regular times of the month at the county courthouse where the property is placed on the auction block and the public is allowed to bid. The lender does place a reserve amount on the property meaning if no one bids above the reserve amount then the lender maintains possession of the property and is given title by the court. This then becomes what is commonly known as an REO property meaning it is owned by the bank. The bank can sell this property privately to an individual like any other normal purchase and sale of real estate.
7. Right to appeal
The homeowner has ten days from the conclusion of the auction to appeal the sale or again to redeem the property. If they do not act during this ten day period then either the lender or the winner of the property at auction is issued a Certificate of Title by the court and now has legal possession of the property.