Foreclosure

When a borrower fails to make any payment due on the mortgage, they are in default. When a borrower defaults, the lender will send a Notice of Default to a borrower. Some mortgages have specific requirements what goes into a Notice of Default, but all will inform the borrower of their default and demand that payment be made, usually within a certain period of time. If the default is cured through payment as demanded in the Notice of Default, there is usually no further action taken. If the default is not cured, the lender may file a foreclosure case.

A foreclosure begins when the lender files a lawsuit against the borrower. The document that is filed is called a Complaint. The foreclosing lender is called the “Plaintiff.” The Complaint states the Lender’s case. In a foreclosure action, the complaint must allege that the borrower has failed to pay a debt that is secured by the mortgage, and that according to the terms of the mortgage, they are entitled to, have the property sold at a court auction, and have the proceeds of the sale applied to the debt that is owed.

Once a Complaint is filed, it must be served on the defendant. After service of the Complaint, a defendant has 20 days to file a response. If a response is not filed, the plaintiff can seek a default judgment against the borrower (known as the “defendant”), which means the lender wins the case without a fight. A defendant can file an Answer to the Complaint, or they can file a Motion to Dismiss. A Motion to Dismiss may be filed if there are legal grounds to have the case thrown out of court. For example, if a “Plaintiff” other than the lender who originated the mortgage files the case that may not be legally correct.  The Plaintiff is required to show how they received the rights to foreclose on that mortgage.  This is known as “standing” to bring the case.  If a Motion to Dismiss is filed, it will be ruled on before an Answer must be filed. If a Motion to Dismiss is denied, or if no Motion to Dismiss is filed, the defendant will file an Answer to the Complaint. In the Answer the defendant admits or denies the allegations of the Complaint and sets forth any legal defenses.

Some affirmative defenses to a foreclosure action include (1) Failure to produce the note. This defense is asserted when the plaintiff does not have the original promissory note. Often notes and mortgages are sold, assigned, or otherwise transferred from one lender to another. The lender that owns and holds the note and mortgage is the one entitled to bring the foreclosure case. If the original note is lost (which happens often), the Plaintiff must prove to the court that it can continue foreclosing with only a copy of the note, according to legal requirements.  There are other legal defenses that may be argued, depending on the facts of each case.

Ultimately the issue will go before a judge, usually on a Motion for Summary Judgment. This is a motion the Plaintiff files when they believe the facts are so clearly in their favor, that a trial isn’t needed and court should simply declare them the winner. There are very few trials of foreclosure actions, because they are usually pretty straight forward. Unless the debtor can show that the payments were being made, or has a valid excuse for non-payment or a strong legal defense, a judgment of foreclosure will be entered. The judgment of foreclosure will state the amount owed on the note, will order the sale of the property with the proceeds to be applied to the debt, and will set the date of the foreclosure sale, usually a month to a month and a half after the date of the judgment.

After a judgment of foreclosure is entered by the Court, a Notice of Sale is published. In Florida, the Notice of Sale must be published by the plaintiff or plaintiff’s attorney once a week for two consecutive weeks in a newspaper of general circulation in the county in which the property is located. The Notice of Sale contains a legal description of the property being sold, the time and place of the sale, and other information required by law. The sale usually takes place about one to two months after the judgment is entered. At the sale, the property is sold to the highest bidder, and the amount received is applied to the plaintiff’s judgment.