Before the foreclosure crisis, which peaked in 2010, the federal and state laws regulating mortgage servicers and foreclosure procedures were relatively limited. And they tended to favor foreclosing lenders. Now, however, federal and Florida foreclosure laws heavily regulate loan servicing and foreclosure processes. And most of the laws give protections to borrowers.
Servicers generally have to provide borrowers with loss mitigation opportunities, account for each foreclosure step, and strictly comply with foreclosure laws. Also, most people who take out a loan to buy a residential property in Florida sign a promissory note and mortgage. These documents give homeowners contractual rights in addition to federal and state legal protections.
So, don't get caught off guard if you're a Florida homeowner behind in mortgage payments. Learn about each step in a Florida foreclosure, from missing your first payment to a foreclosure sale.
In a Florida foreclosure, you'll most likely get the right to:
The period after you fall behind in payments, but before a foreclosure officially starts, is generally called the "preforeclosure" stage. (Sometimes, people refer to the period before a foreclosure sale happens as "preforeclosure," too.)
During this time, the servicer can charge you various fees, like late charges and inspection fees, and, in most cases, must inform you about ways to avoid foreclosure and send you a preforeclosure notice called a "breach letter" (see below).
If you miss a payment, most loans include a grace period of, say, ten or fifteen days, after which time the servicer will assess a late fee. Each month you miss a payment, the servicer will charge this fee.
To find out your loan's late charge amount and grace period, look at the promissory note you signed. You can also find this information on your monthly mortgage statement.
You might have to pay inspection fees. Also, many Florida mortgages allow the lender (or the current loan holder, referred to as the "lender" in this article) to take necessary steps to protect its interest in the property. Property inspections are performed to ensure that the home is occupied and appropriately maintained. Inspections, which are generally drive-by, are usually ordered automatically once the loan goes into default and typically cost around $10 or $15.
Other kinds of fees. Other types of fees the servicer might charge include those for broker's price opinions, which are like appraisals, and property preservation costs, such as for yard maintenance or winterizing an abandoned home.
In a foreclosure, you usually get specific rights under federal and state law and certain contractual rights.
Under federal mortgage servicing laws, if the property is your principal residence, the servicer must contact, or attempt to contact, you by phone to discuss loss mitigation options no later than 36 days after you miss a payment and again within 36 days after each following delinquency.
No later than 45 days after missing a payment, the servicer has to inform you in writing about loss mitigation options that might be available and appoint personnel to help you try to work out a way to avoid foreclosure.
A few exceptions are in place for some of these requirements, though, like if you've filed for bankruptcy or asked the servicer not to contact you under the Fair Debt Collection Practices Act. (12 C.F.R. § 1024.30, 12 C.F.R. § 1024.39, 12 C.F.R. § 1024.40).
Federal mortgage servicing laws also prohibit dual tracking (pursuing a foreclosure while a complete loss mitigation application is pending).
You might qualify for a loan modification, forbearance, or repayment agreement and be able to keep your home. If you'd like to give up your property but not go through a foreclosure, you might be able to complete a short sale or deed in lieu of foreclosure.
Many Florida mortgages have a provision that requires the lender to send a notice, commonly called a "breach letter," informing you that the loan is in default before the lender can accelerate the loan.
The breach letter gives you a chance to cure the default and avoid foreclosure.
Under federal law, the servicer usually can't officially begin a foreclosure until you're more than 120 days past due on payments, subject to a few exceptions. (12 C.F.R. § 1024.41). This 120-day period provides most homeowners ample opportunity to submit a loss mitigation application to the servicer.
If you default on your mortgage payments for your home in Florida, the foreclosure will be judicial.
If you don't respond to the suit, the lender will ask the court for, and probably receive, a default judgment, allowing it to hold a foreclosure sale. But if you choose to defend the foreclosure lawsuit, the case will go through the litigation process.
The lender might then ask the court to grant summary judgment. A "summary judgment motion" asks that the court grant judgment in favor of the lender because there's no dispute about the critical aspects of the case. If the court grants summary judgment for the lender—or you lose at trial—the judge will enter a judgment and order your home sold at auction.
In 2009, the Florida Supreme Court instructed the state's circuit courts to implement a statewide uniform foreclosure mediation program. However, the program was terminated in 2011.
However, courts in Florida can still refer foreclosure lawsuits to mediation on a case-by-case basis. So, in a Florida foreclosure, you might be able to request mediation as part of the process.
The lender must publish a notice of the foreclosure sale on a publicly accessible website for at least two consecutive weeks before the sale or in a newspaper once a week for two consecutive weeks, with the second publication at least five days before the sale. (Fla. Stat. Ann. § 45.031).
The foreclosure sale must occur 20 to 35 days after the judgment date unless the court order says otherwise. (Fla. Stat. Ann. § 45.031). The sale is an auction, which is open to the public.
At the sale, the lender usually makes a credit bid. The lender can bid up to the total amount owed, including fees and costs, or it may bid less. If the lender is the highest bidder, the property becomes "Real Estate Owned" (REO).
In some states, including Florida, when the lender is the high bidder at the sale but bids less than the total debt, it can get a deficiency judgment against the borrower (see below). But if a bidder, say a third party, is the highest bidder and offers more than you owe, and the sale results in excess proceeds—that is, money over and above what's needed to pay off all the liens on your property—you're entitled to that surplus money.
Under Florida law, the court clerk must promptly file a certificate of sale after the foreclosure sale, which usually happens within a day of the sale. You then have ten days after the filing of the certificate of sale to file an objection to the sale. (The bid amount at the sale is presumed to be sufficient consideration for the sale.)
After ten days, assuming no one objects, the clerk confirms the sale and issues a certificate of title to the purchaser. (Fla. Stat. Ann. § 45.031).
In Florida, the lender, usually the high bidder at the foreclosure sale, typically gets a right to possession in the foreclosure judgment. After the clerk files the certificate of title, the lender can then file a motion for a writ of possession.
Once the court grants the motion, the clerk of court issues the writ, and the sheriff executes it. If you (the former homeowner) don't move out, the sheriff will make you leave.
A few potential ways to stop a foreclosure include reinstating the loan, redeeming the property before the sale, or filing for bankruptcy. Of course, if you can work out a loss mitigation option, like a loan modification, that will also stop a foreclosure.
Florida law doesn't provide a statutory right to reinstate the loan before the sale.
But many mortgages, like the uniform Fannie Mae/Freddie Mac mortgage, provide the borrower the right to cure the default after acceleration and reinstate the loan. Check your loan documents to find out if you get a reinstatement right and, if so, the deadline to complete one.
Also, the lender might agree to allow a reinstatement. Call your loan servicer to find out about reinstating your loan.
One way to stop a foreclosure is by "redeeming" the property. To redeem, you must pay off the loan's full amount before the foreclosure sale.
If you're facing a foreclosure, filing for bankruptcy might help. In fact, if a foreclosure sale is scheduled to occur in the next day or so, the best way to stop the sale immediately is by filing for bankruptcy.
Once you file for bankruptcy, something called an "automatic stay" goes into effect. The stay functions as an injunction prohibiting the lender from foreclosing on your home or trying to collect its debt, at least temporarily.
To find out the options available, speak with a local bankruptcy attorney.
In a foreclosure, the borrower's total mortgage debt frequently exceeds the foreclosure sale price. The difference between the total debt and the sale price is called a "deficiency."
Example. Say the total debt owed is $300,000, but the home sells for $250,000 at the foreclosure sale. The deficiency is $50,000.
In some states, the lender can seek a personal judgment against the debtor to recover the deficiency. Generally, once the lender gets a deficiency judgment, the lender may collect this amount—in our example, $50,000—from the borrower.
Florida law allows deficiency judgments subject to some limitations.
In Florida, a lender may obtain a deficiency judgment as part of the foreclosure action or in a separate action within one year for a property that is a one-family to four-family dwelling unit. The limitations period starts on the day after the court clerk issues a certificate of title to the buyer who purchased the home at the foreclosure sale.
The court has flexibility regarding the amount of the deficiency, which can't exceed the difference between the judgment amount and the fair market value in the case of an owner-occupied residential property. (Fla. Stat. Ann. § 702.06).
What happens if your mortgage lender starts foreclosure proceedings, but then the court dismisses the case, or the lender voluntarily dismisses the case? Are you in the clear, or can the lender refile?
Each case is different, and exceptions exist, but in most cases, your lender can refile the case when your foreclosure case is dismissed in Florida.
The substantive or more complicated legal issues (such as standing, which lienholder must be paid first, or whether the lender complied with the terms of the agreement) are generally dealt with at summary judgment hearings or at trial.
When cases are dismissed, it often happens earlier in the process. Many dismissals result from failure to comply with procedural requirements or defects in how the complaint was written.
Sometimes, the case is dismissed at the lender's request for reasons that might not be readily apparent to you. The lender might have found an issue in its case that it didn't want to be exposed or it was simply not prepared to move the case forward as fast as the court required.
In other instances, the court will dismiss the case for failure to prosecute when the lender doesn't file any papers or take any action.
In this article, you'll find details on foreclosure laws in Florida, with citations to statutes so you can learn more. Statutes change, so checking them is always a good idea.
To find Florida's laws, search online for "Florida statutes" or "Florida laws." Make sure you're reading the most recent, official laws. Usually, the URL will end in ".gov" or the statutes will be on an official state legislature webpage.
For more information on federal mortgage servicing laws, as well as foreclosure relief options, go to the Consumer Financial Protection Bureau (CFPB) website.
Get tips on what to do—and what not to do—if you're facing a foreclosure in Foreclosure Do's and Don'ts.
Find out if foreclosures are on the rise.
How courts and agencies interpret and apply laws can change. And some rules can even vary within a state. These are just some of the reasons to consider consulting a lawyer if you're facing a foreclosure.
If you have questions about Florida's foreclosure process or want to learn about potential defenses to a foreclosure and possibly fight the foreclosure in court, consider talking to a foreclosure attorney.
It's also a good idea to talk to a HUD-approved housing counselor about different loss mitigation options. You can use the CFPB's Find a Counselor tool to get a list of HUD-approved housing counseling agencies in your area.
You can also call the Homeownership Preservation Foundation (HOPE) Hotline, open 24 hours a day, seven days a week, at 888-995-HOPE (4673).