THIS IS PRESENTED IN 2 PARTS
How long does it take to be foreclosed?
How long does it take to do a foreclosure in Florida? I always try to write about reality as opposed to theory. But when it comes to foreclosure litigation you need to understand the theory before you can talk about the reality.
Foreclosure procedure is governed by Florida Statute Chapter 702. Foreclosure can proceed under the traditional foreclosure process or it can proceed under a not too new but seldom used (I don’t know why!) shorted procedure set forth in Section 702.10. These methods of foreclosure apply to both residential and to commercial foreclosures, although this article will premise itself on the residential foreclosure. My November 2008 article on the process of the foreclosure was presented in A LAWYER'S EXPLANATION OF THE FORECLOSURE PROCESS. This article updates and applies the evolving reality of court budgets and robo-signing and foreclosure mill shake-ups to bring a better vision of where things stand today.
Understanding the Obligation:
First let us understand the why’s of a foreclosure. There is a promissory note the borrower signs and then there is the mortgage (or security agreement) that the borrower signs. Note: an equity line of credit is a mortgage! The equity is the real estate and the line of credit is the obligation to pay. Often in an equity line of credit, the obligation to pay and the security agreement (the mortgage) are all in one document, so you may not see a separate promissory note and separate mortgage. There is a foreclosure when some material element of the obligation to pay or the obligation regarding the mortgage (the security) has been breached. If it is the promissory note, the breach is usually a failure to pay an installment payment or a balloon payment. If it is the mortgage, the breach is usually non-payment of the real estate taxes, insurance, or some other matter relative to the protection of the priority of the lien of the mortgage security.
The Promissory Note - the obligation to pay back the borrowed money -
In the beginning there is a PROMISSORY NOTE. This is a promise to repay money that is being given by the HOLDER, usually a bank or LENDER. To be sure the promissory note is repaid the HOLDER wants some collateral. The collateral could be anything from your heirloom watch to your car, but for our discussion purposes it will be your house.
The Mortgage - the collateral of your promise to pay back the borrowed money -
The typical way to provide the collateral of your house to the HOLDER of the promissory note is to sign a MORTGAGE. The mortgage is not a promise to pay any money. It is merely the promise that if the promissory note is not paid according to its terms, the HOLDER of the promissory note has the option of selling your house and taking from the proceeds of that sale only enough money to pay back the promissory note, giving to you the balance of any excess money from that sale. However, as pointed out above, there may be obligations that involve the payment of money in a mortgage, but usually that obligation is to pay third parties (like the tax collector) and not the lender directly. (Don’t confuse this with escrow requirements).
When does the Lender Begin to Foreclose the Mortgage?
The answer is in the mortgage or promissory note. Most first mortgages in Florida have a clause that the lender must provide notice to the borrower that the promissory note or mortgage is in default and what must be done to cure the default. This notice usually is sent out after the loan is unpaid for 60 days, although it could be longer. If the default is other than the usual monthly payment not being received by the lender, the notice of default could be sent earlier. This year we have seen the 60 days stretch almost endlessly and countless borrowers come into the office having not paid for six months or a year or sometimes even (much) longer and still no notice of default! I find that simply amazingly negligent on the part of the lender or lender servicer – but those are the realities today. It is safe to expect the expected, but in today’s climate, the expected is a slippery concept.
After the notice has been sent and the requisite time given in the notice to cure the default has expired (usually 30 days), the lender is free to file its foreclosure action.
How Expensive is it for the Lender to File a Foreclosure Action?
Florida amended its filing fees when the deluge of foreclosures was nearing its peak. Whereas filing a foreclosure was not unlike filing any other lawsuit – whether for $30,000 breach of contract or $1 billion tobacco death case – usually around $400 in clerk filing fees, that DRAMATICALLY changed in an effort to make revenue (another word for MONEY). Foreclosures then were jacked up to as much as $1,950 for a foreclosure over $250,000. Even worse, if you as the borrower want to file a counterclaim against the lender, that is another $1,950 that the borrower has to pay. I try not to give political satire, but GIMME A BREAK! Because it is a foreclosure it is going to take a fee of 5 times the norm? Most foreclosures never even get to a trial and have at most 2 court hearings with attorney fees the lender pays of under $1,500! And to charge the desperate and possibly correct borrower the same fee to file its given right of a counterclaim – well, let’s just say that something here is VERY BROKEN! To make matters worse, if the suit is a residential foreclosure, then there is a mandatory mediation that must take place and if the residence is the primary home the lender must pay usually the around $500 mediation fee – otherwise the parties have to split the fee.
The key point however is that the total of $4,000 in expenditures a lender must pay is, although significant, not so much as to discourage a lender from pursuing its remedies.
The Foreclosure Complaint and Lis Pendens:
The foreclosure complaint is a document that tells the court that you signed a promissory note and did not pay it, and you also collateralized the promise to pay the promissory note with a pledge of collateral (a mortgage) of real estate, in this case you house. Some people call this the "lis pendens". In reality the lis pendens is a document that is filed in the court file and also recorded ("filed" and "recorded" have different meanings) in the public records of the county where the real estate is located. The lis pendens mean literally "litigation pending" and it identifies who is involved and what property is involved. Some people think it is a lien on the house, but in a foreclosure litigation situation, the mortgage itself is the lien and the lis pendens is just a notice to the public that a lawsuit is filed, thus alerting anyone that would be buying or otherwise dealing with the identified real estate that its disposition is subject to a lawsuit. There are some issues of priority of liens that could be part of this discussion, but it is not necessary for the answering of your question.
Summons and Service of Process:
The foreclosure complaint is provided to all of the defendants by "service of process" and usually that is accomplished by the delivery of a "summons" to each defendant. The summons says that you have a certain number of days to respond to the complaint filed in the court or a default will be taken against you. Let me mention a few things here:
a. If you are named a defendant in a foreclosure complaint it is because of one of three reasons: (1) you owe the money to the Holder; (2) you are owned money by the Borrower; (3) you are in possession or have a right of possession (like a renter) of the property described in the mortgage. If you are in category 2 or 3 you are not subject to owing money as a result of the lawsuit and the complaint is filed against you only so the mortgaged property can be sold free and clear of any claim you have or may have to the property named in the mortgage.
b. If you don't answer a complaint within the time period stated in the summons, a default will be entered by the court. The default is in effect an admission of the things stated in the complaint relative to your name and relationships in the complaint are all true. What this then means depends on what the complaint says concerning you. If you are a tenant for example, it means that the mortgage is a lien on the property superior to your right of possession. A discussion on foreclosure defenses is for another article unto itself, but they can include violations by the Lender of various regulatory rules. I have two caveats in regard to defenses: (1) don't confuse a defense with a defective foreclosure complaint. A lost note is not a defense, nor is a lack of an assignment of the mortgage. Both are defects in the complaint. (2) Defenses like Truth in Lending violations or RESPA violations require the transaction to be unwound and that means you have to pay back to the lender the money they loaned to you (less certain penalties and attorney fees). If you cannot return the money the defense becomes illusory. Congress is addressing this issue now that the housing market is upside down, but there are no solutions yet. Learn more at my article ** FORECLOSURE DEFENSE FALLACY**. Also be aware that raising defenses as in “throwing lots of “defenses" against the wall to see if one will stick" is dangerous. See FRIVOLOUS DEFENSE TO FORECLOSURE CAN COST BORROWER $$$.
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