Florida Foreclosure Defense
If you are facing foreclosure in Florida, you may wish to retain a Florida attorney to defend the foreclosure, or negotiate with the bank.
During these troubled times, having a Florida attorney on your side can give you the bargaining power you need to negotiate with your lender, or to challenge the foreclosure action in court. David A. Silverstone can assist with all aspects of defending foreclosures, from negotiation, to litigation, to asset protection strategies.
A loan modification is when a lender changes one or more terms of the mortgage. The goal is to lower your payment to one you can afford. The lender may lower your interest rate, change the rate from adjustable to fixed, increase the number of years to pay off the mortgage, and may actually decrease the principal balance owed on the loan.
The financial disclosure requirements are similar to those in a short sale. Lenders typically take four months or more to determine whether they will modify your loan. Eventually, the lender will come to you with modified loan terms. Sometimes you will be able to negotiate the modification proposal to more favorable ones. Using an attorney for those negotiations can help you do this.
The bottom line on loan modification is that it is worth trying, but it will take the lender a long time to get back to you, and the plan the lender comes up with may still not be one you can afford.
Finally, you should be very careful of companies which advertise that they will negotiate the modification for you. Some of these companies are fraudulent, and their goal is merely to part you from your money.
A short sale is when the lender allows a homeowner to sell a property for less than the mortgage payoff. For example if your property is worth $120,000.00, and the amount of the mortgage is $200,000.00, a bank may agree to let you sell the property for $120,000.00 on a short sale. The bank would be agreeing to take less than the full amount of the mortgage. Why would they agree to do this? Because a foreclosure takes time and money, and in the end the bank will wind up selling the property “short” anyway. In order to do a short sale, it is best to contact the loss mitigation department of your bank, and to use an attorney to negotiate the short sale with the lender.
Do Short Sales Always Work?
No. It only works if a buyer is found and approved by the lender. There are a lot of properties for sale, and few buyers. These buyers are looking for below-market bargains, and the lenders want to recoup as much of the mortgage amount as possible. The lender is not there to do you any favors and they may be relatively inflexible on their bottom line price.
A short sale is made more difficult if the home has a second mortgage. The first mortgage holder may agree to the short sale, but the second mortgage holder would have no motivation to release the second mortgage unless they got paid something as well.
In a short sale, the lender will not typically allow any of the proceeds to go towards unpaid property taxes, condominium assessments, or other such charges. You will need to come up with these funds out of pocket. Many times the lender agree to the short sale only if you agree to still be responsible to pay the mortgage balance. You may be asked to sign a new promissory note for the unpaid balance. A skilled attorney may be able to negotiate with the lender regarding this requirement.
Lenders require full financial disclosure as part of the short sale process. If the short sale attempt is unsuccessful, and there is a foreclosure, the lender now knows exactly what your assets are. Some people who own non-exempt assets, would rather take their chances on a foreclosure, rather than reveal what their assets are.
The bottom line on short sales: A short sale is at least worth trying, because, if successful, it could be preferable to foreclosure. It is recommended that you have a real estate attorney assist you in negotiating a short sale, in order that the arrangement with the lender is as fair as possible to you.
Once the lender is the high bidder at the foreclosure sale, and owns the property, the lender will list the property for sale. Because the property is upside down, the price it sells for will be less than the amount of the judgment. This creates a loss, or “deficiency” as it is called in our Florida Statutes.
The amount of the “deficiency” is, under Florida law, the difference between the judgment amount and the fair market value of the property. For example, if the judgment amount is $300,000.00, the fair market value of the property is $210,000.00, and the lender sells it for $200,000.00, there is a deficiency of $90,000.00.
The deficiency judgment gives the lender the right to collect money from your general assets. A deficiency judgment holder has the right to “attach” “levy” or “garnish” your assets in order to get the money that is owed under the judgment. The judgment holder can garnish your bank accounts and wages. The judgment holder can force you to surrender your assets, including real estate, automobiles, stocks, and business interests you own.
So far, few lenders have exercised their right to pursue a deficiency judgment. Lenders currently have their hands full with the sheer volume of foreclosures. It can be assumed that many lenders have not yet decided what their policy will be with regard to deficiency judgments.
There are some good reasons why lenders may not pursue deficiency judgments. The lender has already receives a significant part of its money when it sells the property. Most homeowners would have few assets left after losing their home, would not be worth pursuing. To get a deficiency judgment, the lender must return to court in a separate proceeding, and incur additional attorneys fees and court costs. Lenders may consider it bad public policy to file additional legal actions against thousands of homeowners who are already hurting from the loss of their home, and whatever money they invested in it.
There are many asset protections built into Florida law, which has given Florida a reputation as a “debtor’s paradise”.
Under Florida’ s homestead law a principal residence is protected from money judgments. If you are a head of household, your wages are protected under Florida law. Retirement accounts, annuities and pensions are also protected assets in Florida.
The foreclosure action will be served on you approximately 90 days after your first missed payment. You have 20 days to file a response. After the response is filed, it takes approximately 45 days before a Summary Judgment Hearing takes place. You then have 35 days until the foreclosure sale. The total time you have after your first missed payment is approximately 185 days. The actual time may be longer, depending on how many foreclosures the lender is handling, and whether you file a motion to dismiss, or raise defenses.
When you buy a house or other property you borrow money from a lender, usually a bank. At the closing, you sign a document called a Mortgage, and another one called a Note (also known as “promissory note”). The Note is a written promise to repay the lender and the Mortgage is an agreement that if you don’t make your payment, the lender can take the property from you.
I consult with a lot of people lately who are faced with the prospect of losing their homes in foreclosure. Many of them have become ‘upside down’ on their mortgages; the balance of their mortgage is greater than the value of the property. People whose mortgages are upside down have no good options. They have to choose from among the lesser of three or four evils, including facing foreclosure, litigating with the lender, trying for a short sale or loan modification.
There is no doubt that going into foreclosure can bring up strong emotions, and feels like a crisis. However, it is best to maintain a healthy and businesslike perspective on the process. Knowledge of the legal aspects of foreclosure will empower you to take the steps necessary to get through this.
The Foreclosure Process
An attorney knowledgeable in foreclosures and foreclosure defense can assist you in all aspects of dealing with foreclosure, including responding or defending to foreclosure actions, filing a counterclaim, negotiating with the lender, or just answering questions. David A. Silverstone is a civil litigation, real estate litigation and probate litigation attorney.
The foreclosure action is begun by the lender filing a Complaint. A Complaint is a paper which essentially states that you broke your promise to pay the Note and Mortgage, and requests that the property be sold at a foreclosure sale.
You must be served with the Complaint. In Florida, service is accomplished by a sheriff or process server handing you a copy of the Complaint and a Summons. A Summons is a paper which requires you to file a written response to the Complaint within 20 days. The Summons cautions that if you do not respond, a foreclosure judgment may be entered against you without further notice.
Filing a response called an “Answer” within the 20-day time limit keeps you from having a judgment automatically entered against you. By filing a response you will receive notices of all hearings and court proceedings in the foreclosure action, including copies of all papers filed by the lender’s attorney. The purpose of this is not necessarily to defend the lawsuit, but to make sure the court and attorney know that you are participating in the lawsuit. If you wish to actively fight the foreclosure you should see an attorney. A copy must be mailed to the lawyer, and the original mailed to the Clerk of Court.
The mere filing of an Answer adds time to the foreclosure process. This could be advantageous to the homeowner. Perhaps you need to stay in the property a bit longer for financial or other reasons. Perhaps you are trying to sell the property. You may need the time to negotiate a short sale or modification.
You may have grounds not only to defend the foreclosure, but actually “sue them back” in a counterclaim. If you can show the lender engaged in predatory lending, fraud, Truth in Lending violations, or other illegal conduct, you may be in a position to file a counterclaim. If lender wrongdoing can be shown, the lender could wind up losing its right to collect on the mortgage.
If you believe that you have grounds to file a counterclaim because the lender engaged in some type of serious misconduct, then you should bring it to an attorney. The attorney will evaluate your case and weigh the costs and benefits of undertaking this type of litigation. Be aware that the Summons only gives you 20 days to respond, and you therefore need to go to an attorney quickly.
The judgment which the judge signs carries two important pieces of information. The first one is the judgment amount. The judgment amount is the total of all money owed by you to the lender, including the principal balance of the mortgage, interest, penalties, late fees, attorneys fees, title search fees, etc… The judgment amount is the amount that the property will have to sell for to fully pay off the lender.
The other important information is the foreclosure sale date. In Florida, the foreclosure sale must be held within 35 days. Judges however may, under certain circumstances, allow some extra time beyond the 35 days. If you need extra time, you should request it at the MSJ hearing.
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