FORECLOSURE. What is it exactly? How long does it take? What are my rights as a tenant in a foreclosed home? What should I do if I get served papers? Do I have to keep paying my mortgage? If the bank forecloses, can it still sue me for the amount I owe? These questions are just the tip of the iceberg in a Titanic-sinking mountain of issues related to foreclosure. I will address as many as I can in future articles, but for now, let’s just start with what exactly it is and what happens during a foreclosure…in Florida.
It is important to remember that since property law is regulated (mostly) by STATE law and there are 50 states plus districts, territories, protectorates, and whatever those Federated States of Micronesia are, then there are more than 50 different ways foreclosures are handled. I am a FLORIDA attorney, so I will always talk about the laws in FLORIDA. I REPEAT: THIS INFORMATION IS SPECIFICALLY FOR FLORIDA. A lot of what I say will be the same in your area, but some of the details may differ, particularly on procedure and notice periods and whatnot.
WHAT IS FORECLOSURE?
First, let’s review the documents that you signed when you bought your property. You remember, right? When your hand was hurting from having to sign your name more times than you did in four years of high school? In all those papers, there was a Promissory Note (“the Note") and there was a Mortgage (surprisingly called “the Mortgage"). We talk about “paying my mortgage," but in truth, we are really paying the Note. The Note is your promise to pay back the loan that the bank is giving you to buy the property. The Mortgage is what happens if you do not pay it back. By signing the Mortgage, you agree that if you do not repay the loan, the bank can take your property. This is called granting the bank a Lien on the property. When you do not pay the Note, the bank files a lawsuit to enforce its rights under the Mortgage and to take the property from you. This is called Foreclosing the Lien, orForeclosure.
WHAT ARE THE STEPS OF FORECLOSURE?
You will often hear complaints from people who say they (or more likely their sister’s friend’s, aunt’s, boyfriend’s, 2nd cousin once removed) never knew that the property was being foreclosed until the sheriff showed up with a Writ of Possession to give the 24-hour notice to move out. While that does sometimes happen to tenants (don’t worry tenants, we will talk in another article about your rights as a tenant), it is virtually impossible for an owner living in the home to go through the entire foreclosure process and not know something is up. You certainly know that you are not paying the Mortgage (yea, I know, the Note, but I will stick with the common language) and that foreclosure is coming sooner or later. Oftentimes, the person is hiding and trying to avoid service of the Complaint, thinking that the lien on the property cannot be foreclosed if he is not served. HE IS WRONG!
There is a specific process of Demand and Notice in the filing of a foreclosure action, and after the lawsuit is filed, there are many more times the owner is notified of the proceedings (or at least attempted notification). If you are hiding in a different location, refusing to accept certified mail, and hanging up every time the bank calls, then you can’t really complain about the system you have been ignoring, right?
Now, so far, I have been talking about the bank and foreclosing the Mortgage. You should know that a lien can be placed against your property by others, as well. One of the most common is a Condo or Homeowner’s Association. What I am about to say regarding the process is the same for those liens. For ease of reference, I will just collectively refer to all the lien holders as the bank. Ok?
- Fist, you will get a letter demanding that you pay within 30 days or a lien will be filed against you in the Public Records. If you do not pay what is owed within 30 days, you will get another letter saying that a Claim of Lien will be recorded and that you have 30 more days to pay, or they will foreclose the lien. If you still don’t pay, then the bank can now start with the foreclosure.
- The bank will then file a Complaint and serve you a copy. This is what you see in movies when the process server chases the guy down the street, finally catches him, and says, “You’ve been served!" Great action in the movies, but it doesn’t really happen that way in Florida. The process server does not have to touch you with the papers. He doesn’t even have to serve you; he could serve someone else that lives with you…OR he could even publish a notice in some obscure local newspaper you probably have never heard of (if you cannot be found).
- After you are served, by whatever means, you have 20 days to file anANSWER. BTW…this is something that should definitely NOT be done without an attorney. There are some things that you have to say in the Answer. If you do not say them, you can never say them. It could be the difference between winning and losing. If you don’t Answer within 20 days, you are basically telling the court that you give up. You forfeit. The bank asks the court for a Default, and it wins automatically, even if it had a very bad case.
- After you file your Answer, there will be several months that go by with nothing happening while the bank gets all its documents together. See? If you did not Answer, the bank would not have had to do that, so by answering, you immediately gained several months in the property.
- Eventually, unless you work out a deal with the bank or somehow come up with all the money to pay all of the outstanding amount, the court will grant aFinal Order/Judgment of Foreclosure. When you receive the Final Order/Judgment in the mail, that does not mean you have to move out immediately. The property is still your property.
- After getting a Final Order/Judgment, the bank will ask for a date to be set for the Foreclosure Sale. The sale will be at least a few weeks after the Final Order/Judgment because a notice of the sale must be published for two consecutive weeks in that local paper nobody reads. Banks do not want your property (although COAs and HOAs might). They want to find a buyer for your property before they get it at the Foreclosure Sale. Oftentimes the bank will cancel the sale if there is no buyer already lined up. When the Foreclosure Sale is held, someone (most likely the bank unless you have equity in the property) will be the winning bidder and be issued a Certificate of Sale. Still, you have a little more time.
- Once the Certificate of Sale is issued, you now have 10 days to “redeem" the property. That means that if you can somehow come up with all the money that is now owed, you can buy back the property. Yes, I know what you’re thinking, “If I could pay all the money that is now owed, there never would have been a Foreclosure Sale!!" I didn’t say the law makes sense. And what the heck! Here is one last chance. Maybe the townsfolk will all chip in and help save the farm.
- After the 10 days are up and there are no townspeople to be found chipping, then a Certificate of Title will be issued in the name of the winning bidder (like I said, most likely the bank). NOW, you no longer own the property and better be prepared to move soon. The new owner might be willing to rent the property to you, but if they don’t, you will need to move. You can buy a few more days by refusing to leave right away and forcing the new owner to seek a Writ of Possession from the court. It won’t really be 24 hours, but it will likely be as quick as a week. Time is really up now.
So, there you have it. You will be getting several notices throughout the proceedings if you are living in the home or if you have provided the bank (and the COA/HOA) with your current address. You can also check the status online at the website for the Clerk of Courts of the county where your property is located. As you see from the steps above, the absolute minimum time from the first demand to the Certificate of Title, assuming the owner is easily found and served, the owner does not answer, and the bank works as fast as possible, is about 5 or 6 months. Association lien foreclosures tend to be short, but 9 months is considered fast for a mortgage foreclosure. It is typical for them to last for longer than a year, and quite possibly 2 or 3 years.