Homeowners all over Florida are struggling with mortgage payments. The threat of foreclosure is all too real for too many Tampa families.

If you are facing foreclosure, we will try to give you a better understanding of what you can expect.

A foreclosure begins  is when the lender determines the borrower is sufficiently behind on the mortgage payments; therefore, the lender takes legal action against the borrower in order to seize the property and recover their loses.  The lender are within their rights as a line holder to do this because the loan is secured with the property as collateral.  This assures lenders have a mechanism to recover at least some of their loses.  Banks & financial institutions are in business of making loans to generate  profits.  Contrary to common misconceptions banks and are not in the business of repossessing properties.   Banks foreclose to mitigate loses.  When a borrower defaults, the loan becomes a nonperforming asset, at which time it is no longer earning interest or any income only expenses until is disposed of in a sale. If a loan is not earning interest, it is not producing income for the lender.  If it sells for less the the loan the bank stands to lose even more not to mention to costs the bank has to incur in legal .

In addition to not generating interest income, nonperforming loans actually cost the lender more money because of the lost earning power of the assets and the legal and administrative costs associated with collecting the loan or repossessing the property.

Banks do not want to be landlords. They need to establish a fair market value of the property and place it for sale, or have a plan on when to best sell it, and how. Banks are not allowed to own property for indefinite periods of time. They will try to sell it within five years. Extensions after that are possible, but this is reviewed by the bank’s regulators. The bank knows that the carrying costs generally exceed the income a property can produce so they are motivated to sell it.

There is no standard loss that is acceptable, or that will trigger a fire sale of a property. It depends on the property, the market at the time, the predictions for the market, how long a property has been held, if it was for sale prior to foreclosure and many other factors.

Case in point:

A bank has a $225,000 loan on a nonperforming asset, then they are required to keep 6 to 8 times that amount in reserves which is $1,200,000 to $1,600,000.) Therefore if the lender would take a discount of $160,000 for the $200,000 loan, it allows them to put back into circulation the $1,200,000/$1,600,000 allowing them to collect interest making up for the $40,000 short sale that they took on the $200,000 loan.

What is the Florida Foreclosure Time Line?

When you buy a house in Florida with borrowed money, your lender will place a lien against your property by using a Mortgage or a Deed of Trust. The Deed of Trust or the Mortgage is recorded at the courthouse telling the public that you owe them that amount of borrowed money. You will sign a Note, which you personally guarantee that you will pay the borrowed money back to the Lender.

FIRST MONTH: The home owner gets behind on their first payment. They receive a letter from the lender advising them that they did not receive their payment.

SECOND MONTH: The home owner gets behind on their second payment. They receive a letter from the lender advising them that they did not receive their payment and they need to remit a payment promptly.

THIRD MONTH: The home owner gets behind on their third payment. They receive a letter from the lender advising them that they did not receive the payment and that the lender has forwarded this file to the Attorney. The Attorney will start foreclosure proceedings if the seller does not pay.

FOURTH THROUGH EIGHT MONTH: A Complaint for Foreclosure Summons and a Notice of Lis Pendens is filed with the Court advising the public that the Sellers are in foreclosure.

• Lis Pendens notice served followed by 20 days to file an answer. The serving could be immediately because they are easy to personally serve or it could take some time if they have moved and cannot be found. If the Plaintiff/Lender cannot find the Defendant/Sellers to serve, they will have to publish in the newspaper for a period of a month or more depending on the statute of law. Once service is made on each party, they have 20 days to answer the Complaint from the date they are served. Most Sellers do not answer the Complaint.
• Answering the Complaint may delay the time period for the foreclosure but with no guarantee. When ALL PARTIES (they serve husband, wife, tenants, all other occupants, other lien holders) are served, there is a hearing date scheduled.
• After the answer period ends (and sometimes even before) the lender’s attorney will file a motion with the court to declare summary judgment. There is an additional 20 day answer period before the hearing can be held. Defendants are allowed to attend the hearing and speak. It is recommended that an attorney speak for the borrower if they so desire.
• At the hearing the judgment is entered and a sale date is set (usually in 30 days). Then the property is sold at auction to the highest bidder.

After the sale, there is a 10 day waiting period after the foreclosure sale before Clerk issues Certificate of Title. At that time the new owner can have the Sheriff show up and set the old owner’s possession out on the curb. The lock’s can be changed and old owner would be trespassing if they go back into the house.