Foreclosure is a suit filed on behalf of a mortgage lender to allow the lender to obtain the property in question. For example, if the mortgagee fails to make his or her mortgage payments for several months, the lender may begin foreclosure proceedings. Once the house is in foreclosure, the mortgage lender is able to take possession of the property. The lender usually chooses to sell the property and apply the selling price to the original mortgage holder’s balance of the loan. The lender may also simply take ownership of the property and hold on to the property. If the mortgage holder has taken a second mortgage on the home, or a loan using the equity in the home as collateral, the second mortgage may place the home into foreclosure.

The Florida Foreclosure Process

A foreclosure is a legal process and several steps must be performed during the process. The process in Florida includes:

1.) The Default

If the borrower has failed to make mortgage payments on time and in full each month, the borrower is considered to be in default. If the borrower has obtained a second mortgage on their home and has failed to pay the payments for the second mortgage, the second mortgage will go into default.

2.) The Notice of Default

Once the loan payment has not been made for a period of time, the lender serves the mortgage holder with a Notice of Default. The Notice of Default demands full payment of all amounts in arrears, including interest and fees, within 35 days of the notice. The borrower may also contact the mortgage lender in an attempt to work out a payment plan with them. If the defaulted amount is not paid and new arrangements are not made, the lender will take action by filing foreclosure documents with the court.

3.) Lis Pendens

In the state of Florida, the Lis Pendens must be filed with the County Clerk’s office of the county where the home is located. This notice will show up when anyone attempts to run a title search on the property. The Lis Pendens is a public notice that notifies anyone searching for the title that a lien has been or will be placed on the home. The lien must be cleared before the home may be sold.

4.) The Summons and Complaint

Once the lender files foreclosure paperwork with the court. the Summons and Complaint are delivered to the mortgage holder. The Summons will include a date in the upper right hand corner of the document. This date is the “Return date.” This is the date by which accompanying papers or additional documentation must be filed with the court. This is not a court date.

The Complaint will indicate the basis for which the lender is filing the foreclosure suit. For example, the lender will likely state that they are requesting the foreclosure due to lack of payment on the loan.

4.) The Judgment

The court will likely be entered against the borrower if he or she has failed to make agreed-upon payments. Once the judgment is filed, the borrower will have redemption period that extends even after the home is put up for sale at the Sheriff’s sale. This means that the borrower may pay the mortgage balance in full, along with any legal fees accrued by the lender, to redeem the property. The borrower has the right to remain in the home during these 30 days. The judgment also specifies a date when the auction for the home will be held. Once the 30 days have passed, the borrower will be evicted from the property within a very short period of time, sometimes as little as 48 hours. The home will proceed to auction.

5.) Sheriff’s Sale

In Florida, the Sheriff’s sale is the foreclosure auction for the home. This auction generally is held at the county court house. The mortgage lender places a reserve amount on the home. This ensures that the lender will receive the minimum amount to cover the foreclosed mortgage holder’s loan. If no bidders bid on the home, the lender retains ownership of the property.

6.) Right to Appeal

In Florida, the homeowner who has endured the foreclosure has 10 days after the Sheriff’s sale to redeem the property by paying the loan in full or to appeal the sale. If the homeowner does not appeal or redeem the property in this 10 day period, the individual or lender who purchased the home at auction is given possession of the property.

The Short Sale

The Short Sale is one way for borrowers facing foreclosure to avoid the foreclosure process. With a short sale, the homeowner sells the home at a selling price that is less than the balance owed on the loan. The bank or mortgage company must agree to take less from the borrower than the balance of the loan for a short sale to be processed. In many cases, the lender may be the purchaser of the property. This means that the lender actually pays the borrower for the home, but the lender pays the borrower less than the balance of the loan.

Some may wonder why the lender would purchase the home for less than the borrower owes on the mortgage. The answer is that the cost to the lender to process a foreclosure is much greater than if they simply participated in a short sale with the borrower. The borrower benefits from the short sale because they get out from under a mortgage that they may not be able to pay. In addition, they are not forced through the foreclosure process and their credit rating may be salvaged.

Lenders off two types of short sales: Deficiency Judgment and Pay in Full Without Pursuit. This means that the lender has the option of agreeing to the short sale but making sure the borrower is responsible for paying the amount of the mortgage that is not covered by the short sale. This is the Deficiency Judgment. The second type of short sale is the Pay in Full Without Pursuit. With this type of short sale, the lender agrees to accept the sales price for the property in the short sale as full payment for the mortgage in question.

For homeowners who may be facing the possibility of foreclosure, the short sale is clearly the preferred path of action. If you would like to understand more about the foreclosure process or how you should go about proposing a short sale to your lender, call ? Hamilton-Franklin Realty. We are very experienced with the short sale process and we will walk with you every step of the way. In order to pursue a short sale, you will need to file certain documents and negotiate with your lender. Hamilton-Franklin Realty will be able to provide you with information and knowledge about what to expect and how to file the necessary document.