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?
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.
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