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Q: How are Notes Investors Affected by Foreclosure in Judicial States?
A: A Florida foreclosure on average costs a note investor $3,500.00 to $7,000.00 and currently takes approximately six to twelve months to obtain a judgment and conduct a foreclosure auction.
In order to foreclose a Florida mortgage, borrower must have defaulted on the underlying repayment obligation or a specific note or mortgage provision. Generally, a foreclosure is filed due to borrower’s non-payment of a monthly payment due under the loan documents. Most mortgages require you to send borrower a default letter before foreclosing the mortgage so if you purchase a loan already in foreclosure, confirm lender’s compliance before purchasing. If you purchase a loan not yet in foreclosure, engage an attorney to send your default letter to confirm compliance with the mortgage terms.
If after expiration of the default cure deadline, borrower fails to remit the amount to bring the loan current, your attorney may proceed with filing a foreclosure complaint with the Clerk of Court in the county where the underlying real estate is located. Florida’s legislature recently modified foreclosure filing fees: $400.00 filing fee if outstanding loan balance is less than or equal to $50,000.00; $905.00 if greater than $50,000.00 but under $250,000.00; and $1,905.00 if greater than $250,000.00.
A foreclosure complaint is the document your attorney must file with the Clerk to initiate the foreclosure action. When your attorney files the complaint, the Clerk issues a summons for each named defendant. It is suggested that your attorney use a private process server to serve the summons and complaint rather than the Sheriff because private process servers are more efficient. Upon service, borrower has twenty (20) days to respond to the complaint. If borrower fails to timely file a response, your attorney may obtain a Clerk’s default against borrower. Thereafter, your attorney may move to obtain a final default foreclosure judgment, thereby setting the amounts owed to you and scheduling a foreclosure sale date. If borrower fails to pay the amounts owed before the sale date, the Clerk will hold an auction and issue title to the highest bidder.
If borrower files a response to the complaint, it will likely be a Motion for Additional Time, Motion to Dismiss or an Answer. If borrower requests additional time, it is standard in Florida to allow borrower an additional thirty (30) days if good cause is shown.
If borrower files a Motion to Dismiss, your attorney must schedule it for hearing which adds additional time (average-additional thirty days). If your attorney properly prepared the Complaint, the Court should deny borrower’s motion to dismiss, requiring borrower to file an Answer within ten to twenty days. If borrower files an Answer, your attorney may proceed with filing a Motion for Summary Judgment. As part of filing this motion, your attorney must obtain a sworn affidavit from you detailing the amounts owed. Upon filing the summary judgment motion and related affidavits, your attorney schedules a hearing with the Court. Note that Florida courts require this hearing to take place at least twenty days after filing the motion and related affidavits. Florida courts are currently backlogged with high foreclosure caseloads so your attorney may have trouble scheduling the hearing quickly, so allow for approximately fortyfive days from the filing of the summary judgment motion.
At the summary judgment hearing your attorney asks the Court to enter judgment without a trial. Courts often grant these in foreclosure cases when there are no material facts at issue. Accordingly, if borrower fails to timely dispute the amounts owed with a sworn affidavit of their own, the Court should enter judgment against borrower and set a foreclosure sale.
If the property is borrower’s homestead, the Court requires mediation before a summary judgment hearing. Although mediation may be used by borrower to delay foreclosure, this presents an opportunity to propose workout options. Standard Florida workouts include a deed in lieu of foreclosure, short sale, short payoff, forbearance or stipulated judgment of foreclosure. Make sure your attorney is versed in workouts so you have access to these options. Unless you settle with borrower or the Court enters default or summary judgment against borrower, your case will go to trial. At trial, your attorney will present evidence to the Court necessary to prove your right to foreclosure, after which the Court decides whether your attorney properly proved borrower’s default and the amounts owed. If the Court enters judgment in your favor, the Clerk will sell the property at foreclosure auction as discussed above. The amount owed will be your credit bid amount. The sale’s proceeds will be applied to the amounts you are owed, and in the event your credit bid is the highest bid, title to the property will revert to you.
Your counsel must pursue foreclosure aggressively because desperate borrowers will employ all measures to delay foreclosure, including filing bankruptcy which further delays the foregoing timeframe.
William J. Podolsky, III
Associate
Phelps Dunbar LLP
100 South Ashley Drive, Suite 1900
Tampa, Florida 33602
www.phelpsdunbar.com
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