Top 10 Things to Understand About Foreclosure Proceedings.
Foreclosure rates have dropped by double digits since 2013, but Florida still has the highest foreclosure rate in the nation. Finding your home in foreclosure can be emotionally and mentally overwhelming. Below are 10 things that may help you better understand the Foreclosure process:
1. What happens when there is a foreclosure. A “Lis Pendens” puts the public on notice that a foreclosure has been filed against a property. The Clerk of Court will record the Lis Pendens in the public records. If you do not respond to the Complaint after you have been served, then a default may be entered against you.
2. You have to respond to the Summons and Complaint. Some borrowers erroneously rely on their communications with the bank instead of paying attention to the Court proceedings. Even if you are trying to work with the bank on loss mitigation, you are still required to respond to the Complaint or risk being defaulted. Lack of response generates a detrimental problem that many people create for themselves.
3. Loss Mitigation. During foreclosure the bank/servicer may work with homeowners to minimize losses through a Loss Mitigation process. This is done not only through a loan modification, but also includes: short sales, deed-in-lieu of foreclosure, cash for keys, repayment plans and forbearance.
4. Deficiency. The difference between the amount owed by the borrower and the foreclosure sales price is called a Deficiency. In the case of an owner-occupied residential property, the amount of the deficiency may not exceed the difference between the judgment amount (or in the case of a short sale, the outstanding debt,) and the fair market value of the property on the date of sale.
5. Deficiency Judgments and House Bill 87. More and more lenders have been going after deficiency judgments since the passing of House Bill 87 on June 7, 2013. House Bill 87 limits the amount of time that Plaintiff has to go after the deficiency. In the state of Florida the lender has only one year from the date of the foreclosure sale to file a motion with the court to seek a deficiency claim based upon the foreclosure action.
6. Waiver of Deficiency is critical for Borrowers. When negotiating a Consent to final judgment, short sale or deed in lieu (DIL), or any kind or settlement, it is important to ask the lender to do a waiver of deficiency to prevent them (or any other entity) from pursuing the deficiency.
7. Who may file to get a Deficiency Judgment. Lenders may choose to go after the deficiency themselves or may assign the right to a claim for deficiency a third party. Just like with credit cards or other debt, the judgment can be sold/assigned to another person or entity. They can choose to sue you for this deficiency, if it had not been waived in the original case.
8. What happens if you are served by publication in a foreclosure case. If the borrower has avoided being served with a foreclosure lawsuit/complaint and the lender has decided to proceed to serve the party by publication in the paper (service by publication), then the court doesn’t have personal jurisdiction over that defendant and therefore a deficiency judgment is not allowed.
9. Surplus Fund. If there is any excess money or surplus left after payment of all disbursements required by the final judgment of foreclosure and shown on the certificate of disbursements, other interested parties, including the Borrower, can make a claim to this surplus fund. If no one claims this surplus fund, it goes to the state.
10. After the foreclosure sale/auction. How soon you will need to vacate the property depends on several factors, including if the Plaintiff purchased the property or if it was purchased by a Third Party. This varies, but the clerk will issue the Certificate of Tile 10 days after the sale. If the property isn’t vacated when the buyer is ready to assume possession (days, weeks, months or even years later), the buyer can file a Writ of Possession to get the occupants out. Tenants with bonafide leases have certain protections by law, however.