The foreclosure crisis that began in 2008 and is slowly subsiding has been a hot topic for years now, particularly, here in Florida where the number of foreclosures continues to beat the national averages. Yet, the average understanding is that when you don’t pay you mortgage, the bank comes and takes your home. And while at a very broad level, this is true, the process is a lot more complicated and open to alternative outcomes.
The Home Financing
The foreclosure process actually begins long before a mortgage payment is ever missed. It begins when the purchase of a home is financed. There are two key agreements, the note and the mortgage, that provide the rules that will govern if a payment is missed and if following that, a foreclosure action is instituted.
The note, or promissory note, is the contract under which the lender agrees to lend money and the home purchaser agrees to pay back the loan. The loan will typically detail the interest rate, term of the agreement, and when payments are to be made. The Mortgage is a security agreement under which the home purchaser “secures” the loan with the property they are purchasing. In other words, if the home purchaser fails to make payments under the note, the lender can foreclose on the property under the mortgage.
The Notice of Default
The note and mortgage are best known for providing the lender with tools to recover their investment through foreclosure. For one, most mortgages allow the lender to “accelerate” the loan if the borrower defaults. In other words, when default occurs, the lender can require the borrower/homeowner to pay the entire remaining amount due under the note.
Yet, the mortgage and note are also an important source of protection for homeowners. Notably, almost every Florida mortgage contains a provision requiring that the lender give the borrower notice and an opportunity to cure (i.e. fix the problem) if the borrower defaults on their loan payments. Under the terms of the mortgage, the notice must be given prior for filing foreclosure proceedings.
The Foreclosure Proceedings
Homeowners who receive a notice of default should proceed cautiously: if no other action is taken or agreement reached, the next step is typically the initiation foreclosure proceedings. Foreclosure proceedings in Florida are civil lawsuits that largely follow the same process as other lawsuits.
The first step in the court process is the filing and service of the Complaint, the document in which the lender lays out its claims against the homeowner. As with all lawsuits, the borrower must usually be personally served with the Complaint. This protects the borrower by ensuring that they are aware of the proceedings against them. Around the same time as the Complaint is filed, a Lis Pendens is recorded in the property records to place the public “on notice” of the pending action regarding the property.
The foreclosure proceedings then continue as all other civil proceedings. The homeowner/borrower has an opportunity to respond to the allegations by the lender and assert any defenses that are available. Both parties then get the opportunity to request information from each other that Is related to the lawsuit.
During the proceedings, the parties may reach a settlement agreement or the court may grant a pre-trial judgment in favor of one party prior to trial through summary judgment proceedings. If neither of these occur, the case will proceed to trial and the court will enter judgment in favor of either the lender or the homeowner depending on whose version of the case the facts support.
Post Litigation Foreclosure Proceedings
If the lender wins at trial, there remain steps to be taken before the lender can recover any of the amounts owed to it. The first step is the foreclosure sale, where the lender typically purchases the home. However, even after the sale, the borrower has a short period of time to “redeem” the property by paying off the entire amount due under the note. If this doesn’t occur title is officially transferred to the lender, who may then have to pursue eviction if people, renters or former owners, remain in the home. The lender may also pursue a deficiency judgment if they cannot recover the full amount owed under the note by selling the home.
And That’s Just the Overview
Foreclosure proceedings can be long and complicated and an experienced Jacksonville foreclosure attorney like the ones at Adam Law Group can help you identify the best approach if you are behind on your mortgage payments or already a defendant in foreclosure proceedings.