Full question:
I hold a mortgage on a residential property who is behind payments for five months. How do I foreclose?
- Category: Real Property
- Subcategory: Foreclosure
- Date:
- State: Florida
Answer:
In Florida and other states a mortgagee may foreclose a mortgage lien upon real property by judicial foreclosure. Judicial foreclosure is a court proceeding in which a mortgagee, generally acting through a lawyer, commences a civil action by filing a complaint with the court. The complaint names the mortgagor and the mortgagee and describes the real property and the events of default and asks the court to order foreclosure of the mortgage lien on the real property unless the mortgagor pays the full amount of the indebtedness (all principal and interest). If the mortgagor fails to do so, then the court orders foreclosure of the mortage by judicial sale. The mortgagee may bid the amount of the indebtedness - or less - at the judicial sale. The mortgagor, however, generally has a statutory right of redemption from foreclosure for a period - generally one year or less.
A mortgage should be aware that if the mortgagor files for bankruptcy either before or at any time during the foreclosure process, then the automatic stay provision (Section 362) of the Bankruptcy Code halts the foreclosure process unless and until the mortgagee receives an order from the Bankruptcy Court relieving the mortgagee from the automatic stay.
An experienced creditor's lawyer in Florida, one who has participated in many foreclosures and who knows bankruptcy law and procedure, or better yet, has experience in bankrupty proceedings, could be of great assistance to you as a creditor coping with a delinquent debtor.
Please see the information at the following links:
http://stopforeclosure.com/Florida_Foreclosure_Law.htm
http://myfloridalegal.com/pages.nsf/Main/55BC21CB13128F728525741800481491
For your further general information, please read the following materials and see the following links.
Foreclosure: Law & Legal Definition.
Foreclosure is the procedure by which a party who has loaned money secured by a mortgage or deed of trust on real property (or has an unpaid judgment), forces the sale of the real property to recover the money due, unpaid interest, plus the costs of foreclosure, after the debtor fails to make payment. The lender must serve a notice of default on the debtor after a certain time period from when the payment becomes past due, which varies by state. The notice will give the borrower a certain time period and amount necessary to be paid in order to "cure" the default and avoid foreclosure. If the delinquency and costs of foreclosure are not paid within this time, then the lender (or the trustee in states using deeds of trust) will set a foreclosure date for selling the property at public sale. The property may be redeemed by the borrower by paying all delinquencies and costs, up to the time of sale and in some state, for a period after sale.
There is also judicial foreclosure which is used in several states with the mortgage system or in deed of trust. This procedure is used when the amount due is greater than the equity value of the real property, and the lender wishes to get a deficiency judgment for the amount still due after sale. However, some states give deficiency judgments without filing a lawsuit when the foreclosure is upon the mortgage or deed of trust.
It is suggested that a person in risk of foreclosure try to work with the lender to prevent the foreclosure. The lender may be willing to give the borrower extra time to pay, or may suggest debt counseling to restructure or consolidate the debt. It may be possible to create a trust account to protect the debtor's assets, or rework the loan for an extended period of time to lower the monthly payments. The past due amount could be added into the new loan. A debtor will sometimes sell the home to pay off the delinquent amount. A voluntary foreclosure involves selling the home to the lender. Voluntary foreclosure may be pursued to minimize the damage to the debtor's credit record associated with involuntary foreclosure. In a voluntary foreclosure, the debtor not be held liable if the home sells below the debt amount. Due to the loss of financial control and credit damage involved, bankruptcy is generally viewed as a last resort to avoid foreclosure. In bankruptcy cases, the lender is entitled to apply to the court for relief from the automatic stay to allow it to continue foreclosure proceedings.
After the sheriff sale, the bank will have to request that the court order the former owners and current unlawful occupants to be evicted from the house. Usually all that is required to get an eviction order is proof that the title was transferred on the day of the sheriff sale. Therefore, as the new owner, the lender has the right to determine who lives on the property. After the foreclosure victims have exhausted their options to stop foreclosure with no success, and the sheriff sale has been conducted, the eviction process will typically begin very soon.
Other types of foreclosure include foreclosure by power of sale and strict foreclosure. Foreclosure by power of sale is allowed by many states if a power of sale clause is included in the mortgage. [IT IS NOT ALLOWED IN FLORIDA.] This process involves the sale of the property by the mortgage holder without court supervision. It is generally quicker than foreclosure by judicial sale. Strict foreclosure is a process available in a few states which allows the mortgagee to petition the court for foreclosure, and if granted, the court will require the mortgagor who is behind in payment to make payment within a specified time. If the mortgagor fails to do so, the mortgage holder gains the title to the property with no obligation to sell it. This type of foreclosure is generally available only when the value of the property is less than the debt.
When the lender makes a motion for an eviction order, the foreclosure victims have an opportunity to raise any violations of required procedure in their defense. Procedures vary by jurisdiction, so local law needs to be consulted. The owners will always get a chance to respond to any motion the bank makes in court, and the lender's attorneys often violate some rule of procedure, which include state laws, county rules, and specific court rules. However, the foreclosure victims need to consider whether they want to answer every motion the bank brings and drag out the process, which will increase the legal fees that will eventually be added to the total payoff.
Foreclosure Summary.
Foreclosure is the legal right of a mortgage holder or other third-party lien holder to gain ownership of the property and/or the right to sell the property and use the proceeds to pay off the mortgage if the mortgage or lien is in default. It is a concept that has existed for centuries.
Initially, the law had it that a mortgage default resulted in the automatic ownership of the property by the holder of the mortgage (sometimes referred to as the mortgagee). But the law developed over the years so as to allow mortgagors time to pay off mortgages before their property was taken away. This process of taking away the mortgagor's property because of default is what constitutes foreclosure.
Today, numerous state laws and regulations govern foreclosure to protect both the mortgagor and the holder of the mortgage from unfairness and fraud. In the United States, although states have their own variations, the basic premises of foreclosure law remain the same.
Types of Foreclosure.
The mortgage holder can usually initiate foreclosure anytime after a default on the mortgage. Within the United States, there exist several types of foreclosure. Two are widely used, with the rest being possibilities only in a few states.
The most important type of foreclosure is foreclosure by judicial sale. This is available in every state and is the required method in many. It involves the sale of the mortgaged property done under the supervision of a court, with the proceeds going first to satisfy the mortgage, and then to satisfy other lien holders, and finally to the mortgagor. Because it is a legal action, all the proper parties must be notified of the foreclosure, and there will be both pleadings and some sort of judicial decision, usually after a short trial.
The second type of foreclosure, foreclosure by power of sale, involves the sale of the property by the mortgage holder not through the supervision of a court. Where it is available, foreclosure by power of sale is generally a more expedient way of foreclosing on a property than foreclosure by judicial sale. The majority of states allow this method of foreclosure. Again, proceeds from the sale go first to the mortgage holder, then to other lien holders, and finally to the mortgagor.
Other types of foreclosure are only available in limited places and are therefore considered minor methods of foreclosure. Strict foreclosure is one example. Under strict foreclosure, when a mortgagor defaults, a court orders the mortgagor to pay the mortgage within a certain period of time. If the mortgagor fails, the mortgage holder automatically gains title, with no obligation to sell the property. Strict foreclosure was the original method of foreclosure, but today it is only available in New Hampshire and Vermont.
Statutory Redemption.
Statutory redemption allows the mortgagor to redeem the mortgage even after foreclosure sale. About one-half the states have statutory redemption laws. Generally, these laws give anywhere from six months to a year for the mortgagor to redeem the mortgage by payment of the foreclosure sale price plus a statutory rate of interest to the sale purchaser. Junior lien holders also have a right to redeem under these statutes, in order of their priority, though not until the period for the mortgagor to redeem runs out. As a rule, the mortgagor can retain possession of their property during this statutory redemption period.
Federal Laws Affecting Foreclosure:
At least two federal laws clearly apply to foreclosure actions.
Bankruptcy.
The filing of any bankruptcy action automatically stays a foreclosure proceeding, regardless of type. At that point, whether the stay will be lifted depends on whether the mortgagor has equity in the mortgaged property. If the bankruptcy has been filed under a Chapter 11 petition, the bankruptcy court may "terminate, annul, modify or condition such stay" for cause, including the lack of adequate protection of an interest in property of the mortgage holder, or if the mortgagor does not have equity in the property and the property is not necessary for an effective reorganization.
If it has been filed as a straight bankruptcy petition, asking for discharge of all debts, the mortgage holder will be allowed to foreclose if the bankrupt debtor has no equity in the property. If there is equity in the property, the property can be sold by the bankruptcy court.
Servicemembers Civil Relief Act of 2003.
The Servicemembers Civil Relief Act of 2003, replacing the Soldiers and Sailors Relief Act of 1940, gives special protection to mortgagors on active duty in the armed forces for mortgage loans executed prior to when they went into service. The Act provides that a service person can apply to a court to set aside a default judgment leading to a foreclosure action. Because of this provision, a mortgage holder initiating a foreclosure action against a mortgagor who fails to answer the foreclosure complaint must file an affidavit with the court stating the mortgagor is not on active duty in the armed services.
If the mortgagor is in the armed services, the individual must be present or represented at the foreclosure hearing, meaning foreclosure by power of sale is not available. If a court finds that the mortgagor's ability to meet the terms of the mortgage has been affected by their service in the armed forces, they can stay the foreclosure action as long as the person is in the service.
This content is for informational purposes only and is not legal advice. Legal statutes mentioned reflect the law at the time the content was written and may no longer be current. Always verify the latest version of the law before relying on it.
