Ways to Avoid Mortgage Foreclosure
There are ways to avoid mortgage foreclosure in the state of Florida. To do so, homeowners need to understand the process and act quickly to prevent it from developing to the final stage of eviction.
In Florida, a final judgment of foreclosure is an order granted to a financial institution by a court. The order allows the financial institution to seize and sell the property of borrowers who have failed to pay their mortgage. These sales often occur in an online auction and it is not uncommon for the financial institution that issued the mortgage to buy back the property itself.
There are two types of final judgment of foreclosure, in rem (against the property) and in personam (against the mortgage holder). Often, a home looks unlikely to sell for enough to cover the unpaid principal of the mortgage, accumulated interest, late fees, and legal costs. In these cases, the bank can apply to the court for an additional in personam judgment against the property owner for the difference.
The homeowner typically retains the right to pay off the entire mortgage and all related fees in order to keep their property. However, since most property owners in foreclosure are experiencing financial difficulty, this is unlikely.
Once the foreclosure sale occurs, the new property owner (which as mentioned earlier may be the same financial institution that issued the mortgage) can evict the occupant of the property as soon as the certificate of title is filed by the clerk. This means that eviction can occur rapidly without filing a writ of possession. In the case that the property is a house, the local sheriff can take action immediately to force the occupants from the home.
As one of the last steps in the process leading up to a foreclosure sale, reaching a final judgment of foreclosure is best avoided by any homeowners who do not want to lose their homes.
Before it gets to that point, there are many steps along the way where homeowners can stop the process and receive support that can result in them not losing their homes.
Avoiding a Foreclosure
As a homeowner in Florida, there are several ways to avoid the foreclosure process. If a homeowner acts quickly they can obtain government relief, work out a loan modification, reinstate the loan, redeem the property before the sale or file for bankruptcy. Any of these actions could avoid a foreclosure sale and eviction.
Remain in the Property
Homeowners facing potential foreclosure are more likely to keep their homes if they can prove that the home is still their main residence. Staying in the home avoids the lender from making the case that the homeowner has abandoned the property. If the case for abandonment can successfully be made in court, then the bank can accelerate the foreclosure process.
Take Early Action
In addition to remaining in your property, it is important to pick a remediation strategy early and begin working towards it right away. Homeowners anticipating that they will experience financial hardship can even take action prior to missing their first mortgage payment. Consulting an experienced Florida real estate attorney early is the best way for a homeowner to ensure that they are aware of their rights, obligations and options.
Seek Legal Representation
A real estate attorney with a background in fighting foreclosures will be able to guide distressed homeowners by first assessing their financial picture and then creating an action plan to avoid an escalation toward a foreclosure sale and eventual eviction.
“If a homeowner acts quickly they can obtain government relief, work out a loan modification, reinstate the loan, redeem the property before the sale or file for bankruptcy.”
Reinstating the Mortgage
Borrowers are said to have reinstated their mortgage when they cover all mortgage back payments as well as the bank’s late fees and legal fees. Unfortunately in Florida, when borrowers make such a payment prior to a certain time in the foreclosure process, the lender is not under any obligation to stop the foreclosure action and reinstate the mortgage.
Nevertheless, most home loan contracts do allow for reinstatement prior to the point that the court enters a final judgment. Homeowners facing foreclosure could benefit from consulting an experienced foreclosure attorney who can carefully review their home loan documents and determine if there is a right to reinstate the mortgage and up to what time reinstatement can occur.
If an attorney reviews the loan documents and discovers that there is not a right to restatement, then all hope is still not lost. Many banks, especially when confronted by an attorney acting on the behalf of a homeowner, are likely to offer the option of reinstatement even if it is not explicitly stated in the loan contract.
Redeeming the Property
Redeeming your home involves a much larger payment than simply reinstating your mortgage. It involves making a lump sum payment to pay off the entire remaining loan balance, late fees, interest and attorney’s fees.
While it is likely that homeowners who have defaulted on their mortgage debt will not have the resources to redeem a property, there are several scenarios where it may be possible. The homeowner may have access to cash value in a whole life insurance policy or in the home itself. Perhaps the mortgage is nearly paid off and the amount to redeem the home is similar to the amount needed to reinstate the mortgage. Either way, if redeeming the property is an option, an experienced attorney acting for the homeowner can interpret the Florida law allowing for redemption within a certain period of time.
Obtaining a Loan Modification
Many lenders are willing to make exceptions and work with mortgage borrowers who temporarily cannot make mortgage payments. In such cases, borrowers will need to present documents proving hardship. An attorney will be able to draft an effective hardship letter detailing the homeowner’s situation and the cause of the financial difficulties. It is important to state in the letter that the financial hardship is temporary and that full payments can now (or very soon) restart. The bank, after all, is most interested in receiving payments for the loan and most likely to make a modification when there is evidence that repayment of the mortgage is not in long-term jeopardy.
Filing for Bankruptcy
The federal government, as well as the State of Florida, have a homestead exemption that allows a person filing for bankruptcy to keep their home during the bankruptcy process. In general, the law requires homeowners to have been resident in Florida a certain amount of time and for properties to be a certain size depending on location. An experienced real estate attorney will be able to see if the Florida homestead exemption applies and file all necessary documentation.
South Florida Law
Facing foreclosure can be an uphill battle for families and individuals. However, it’s a battle that does not have to be fought alone. South Florida Law provides comprehensive legal support to those facing foreclosure on their Florida-based property. South Florida Law is a boutique-sized law firm with big law firm resources. This unique set of characteristics allows us to give our clients attention to detail and partner-level access to advice while affording us the resources to go head-to-head with the legal counsels of big banks in foreclosure cases.
If you are facing foreclosure of your home or other property in Florida, let the attorneys of South Florida Law protect you against action by your financial institution. Reach out to us today via our contact form or by calling (954) 900-8885.