Though some people were in a poor financial position before the pandemic, the influx of COVID-19 has caused an unprecedented number of unemployment cases. Luckily for most homeowners, for a period of time, many states enacted protections and placed moratoriums on residential mortgage foreclosures.
Unfortunately, in Florida, those protections have come to an end. As of October 1st, Florida Governor Ron Desantis made the decision to allow the statewide order against evictions and foreclosures to lapse. For residents who rent, the expiration of this moratorium will have little to no effect. That’s because the Center for Disease Control (CDC) issued a federal order freezing tenant evictions. In order to take advantage of this, tenants are required to submit this declaration form to their landlords, asserting that they have experienced a “substantial loss of household income” and have made a reasonable effort to obtain government assistance. It is important that all renter apprise themselves of this CDC option, as landlord are not required to let you know it exists before initiating eviction.
For Florida homeowners, however, the CDC’s federal order will be ineffectual. The order does not include protections preventing mortgage foreclosures. As such, it is crucial that all Florida homeowners understand what a foreclosure is, the foreclosure process and the best options for remaining in your home.
Foreclosure vs. Replevin:
When you use a loan, usually from a bank, to purchase real property (just the land or with a home), you will typically be required to sign 1) a Promissory Note (a contract where you promise to repay the loan) and 2) a Mortgage (a security document that allows the purchased property to be used as collateral in the event that you default on payments).
Replevins take place when a mobile or manufactured home is purchased, but the land where the home resides was not bought with a mortgaged loan. Mobile/manufactured homes are considered personal property and instead of foreclosure, they would be repossessed. If you secured a loan to purchase your mobile/manufactured home and the land under the same mortgage, then your lender will enact a normal foreclosure.
Types of Foreclosure
- Non-Judicial Foreclosures. In this type of foreclosure, the lender does not need to file a lawsuit against the homeowner; as such these foreclosures can take as few as 60 to 120 days.
- Judicial Foreclosures. Here, since the homeowner holds title and the lender has to go to court to initiate the foreclosure, this type of foreclosure can often take longer, sometimes 180 days or more. Florida is a Judicial Foreclosure
- Lien Foreclosures. Banks are not the only lenders who can foreclose on homes in Florida. Each year hundreds of foreclosure cases are filed by homeowner’s associations. HOA’s can be unforgiving and have been known to start foreclosure proceedings when the homeowner is just a few dollars past due. Under Florida Statute 720.3085, before a homeowners association can foreclose, they must provide the homeowners with 45 days’ notice. The notice must show details of the amount owed and provide a chance for the homeowner to pay.
Step-by-Step Foreclosure Process
1. Following the 1st missed payment, the homeowner will receive a notice and likely incur late fees. If the missed payment is a one-time situation or oversight, most lenders will understand and no further action will be taken. Multiple missed payments, however, will eventually draw the attention and concern of the lender.
2. Pre-Foreclosure. In Florida, a foreclosure suit cannot be filed until the homeowner has been delinquent for at least 120 days. During this period, the homeowner should attempt to compromise with their lender. Options like loan modification or a short sale may work. It would be best to hire an attorney at this point.
3. Notice of Default. This notice, issued by your lender, begins the foreclosure process and puts you on notice that a complaint has been made against you.
4. Summons and Complaint. A summons and complaint is filed, which indicates that litigation is pending. This formally begins the judicial foreclosure process, which means the outcome will be publicly recorded.
5. Homeowner’s Response. The homeowner will have 20 days to file an answer to the complaint. If you fail to answer, you risk a default judgment being entered against you. Here is where you can explain your situation and raise any defenses. Its crucial here that you discuss the best way to respond with a qualified attorney.
6. Court Proceedings. Here the lender may ask the judge to make a decision in their favor based solely on the details of the submitted complaint and answer. If granted, a foreclosure judgment will be issued. If denied, you and your attorney should prepare to argue your case at a trial.
7. Sale and Eviction. If a decision is made on behalf of the lender, the home will be sold at auction. Once sold, you will be evicted.
8. Deficiency Judgment. In the state of Florida, lenders have the option to seek a deficiency judgment for the amount that was not covered by the property’s sale price. If your lender pursues this option be sure to loop in your attorney.
Avoiding Foreclosure to…
- Keep Your Home.
- Become Current (Reinstatement): If you’re in a better financial state than you were a few month ago, this option may work for you. Reinstatement requires you to pay back your past due balance in full before the judgment or property sale.
- Payoff: If you get a windfall or can borrow the funds to fully payoff your loan, you can do so at any time prior to judgment or foreclosure sale. Keep in mind early payoff fees may apply.
- Loan Modification: A loan modification may allow you to re-negotiate the terms of your original loan to lower monthly payments, or tack on the past due amount and extend your loan period. Modifications can be difficult to obtain and a lawyer is recommended.
- Forbearance or Repayment Plan: A reduction or deferment of your payments for a predetermined amount of time.
- Bankruptcy: If someone has exhausted all other options, filing for bankruptcy may delay foreclosure for 90 days or more. This could allow you to save up money to pay past due amounts.
- Prevent a Judgment on Your Record.
- Short Sale: A short sale may be an option when you are “under water” (i.e. when the current appraised value of your home is less than what you owe on your loan).
- Eviction Extension: Some lenders will extend your eviction date if you agree to the foreclosure. While not ideal, this will give you time to find new housing, and keep your credit history intact.
- Deed-in-lieu of Foreclosure: You execute a deed to avoid the foreclosure. Your lender becomes title owner, you no longer owe any debt, and you won’t have a foreclosure judgment against you. The deed execution will require a lawyer.
When it comes to foreclosures, there are many options to keep your home and avoid judgments. However, they can be difficult traverse and lenders are not always willing to work with homeowners. Still, many homeowners are in the same boat right now and lenders may be more flexible. So, if you are struggling to keep up with your mortgage payments and would like to talk to our experienced real estate attorneys. Contact us today to schedule a free consultation today.
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This article is for informational purposes only. It does not create an attorney-client relationship with any reader nor should it be construed as legal advice. If you need legal advice, please contact our firm.