Outline of Stovash, Case & Tingley, P.A.’s Florida Foreclosure Law and Procedure Handbook

Prepared by:

Stovash, Case & Tingley, P.A.
SunTrust Center
200 South Orange Avenue
Suite 1220
Orlando, FL 32801-3410
Phone: 407-316-0393
Fax: 407-316-8969

I. Introduction: As the preferred law firm of several financial institutions in the State of Florida, Stovash, Case & Tingley, P.A., always receives inquiries from our clients regarding the legal process in Florida to foreclose mortgage interests in real property. The inquires cover a broad range of topics, including the basic steps to foreclosing a mortgage and recovering sums of money under a promissory note, the special procedures involved in foreclosing and obtaining title to personal property on real property (e.g., mobile homes), the basics of federal bankruptcy law and bankruptcy's impact on a bank's rights, and the procedures that must be followed when original notes and other instruments are lost or destroyed.

II. Foreclosure Process: Strategizing and managing foreclosure of real property differs depending upon whether the Bank holds a superior or inferior lien on the subject property.

III. The Process When the Bank Holds the First Mortgage

1. Necessary Documents and Information to Commence Foreclosure Process
   1. Need written instructions for handling from the Bank.
   2. Need to know what amount is past due, the accelerated balance, and the amount that could be paid by the customer to reinstate the Bank's loan.
   3. The original mortgage, note, and security agreement (if applicable) are necessary. If originals are not available, we need to know that fact and copies must be provided.
2. General Foreclosure Procedure
   1. Demand Letter: Typically, a thirty (30) day demand letter is forwarded to the customer at the onset of the foreclosure process. The demand letter advises the customer that the loan is in default and that the Bank has exercised its right to accelerate the amounts due under the mortgage and note.
   2. Foreclosure Report Analysis: A foreclosure report for the property is analyzed to identify any subordinate lienholders whose interests must be foreclosed and any superior lienholders that either (1) have been satisfied but not of record, or (2) will have to be satisfied by the Bank if the property is purchased at judicial sale by the Bank.
   3. Complaint: The Complaint is generally two (2) counts. Count I asserts a cause of action for mortgage foreclosure. Under this cause of action, the interests of the named defendants are foreclosed, the Bank is awarded damages for the amounts due, and if the damages awarded are not paid to the Bank, the property is sold at judicial sale. No personal judgment for damages is entered against the customer under Count I. Count II asserts a cause of action for breach of the note. This cause of action permits the award of a personal judgment in favor of the Bank and against the customer.
   4. Service of Process: Defendants in a mortgage foreclosure action may be served by personal or constructive service of process. Damages will not be awarded against a defendant for breach of a note unless personal service has been perfected.
   5. Response by Defendants or Default: Defendants have twenty (20) days to file a responsive pleading to the Complaint. If no response, a Motion for Clerk's Default is filed with Clerk of Court.
   6. Motion for Summary Judgment: Motion for Summary Judgment is appropriate when no issues of fact exist and it is filed with the following supporting Affidavits:
      1. Affidavit of Amounts Due;
      2. Affidavit of Costs;
      3. Affidavit of Attorneys' Fees; and
      4. Affidavit of Reasonable Attorneys' Fees.
   7. Final Judgment of Foreclosure: Awards total amount due to the Bank and directs Clerk of Court to sell the property at judicial sale if judgment amount awarded is not paid to the Bank.
   8. Judicial Sale: Formal process by which property is sold at public sale to satisfy amounts due to Bank if amount has not been satisfied by defaulting customer.
3. Areas of Special Concern
   1. Mobile Homes: If the loan is secured by an interest in a mobile home, generally the Bank has a separate Security Agreement and can take title to the mobile home through DMV or through its foreclosure action.
   2. Bankruptcy:
      1. The type of bankruptcy impacts how the Bank should proceed.
         1. Chapter 13 or Chapter 11 (Reorganization)
         2. Chapter 7 (Liquidation)
      2. The timing of the bankruptcy filing is critical to the strategy for protecting the Bank's interest in the property that secures its loan.
   3. Reestablishing Lost Instruments: If the original note cannot be located, an additional count may be added in the foreclosure action to reestablish the lost instrument.
   4. Deficiency Judgments: If the amounts due and owing to the Bank are not fully satisfied by the proceeds of the judicial sale, a deficiency judgment can be obtained against the customer if the lawsuit was not limited to in rem relief (e.g., if the customer is in bankruptcy or is deceased).
   5. Workouts: In many cases it is beneficial to work out a resolution with the customer instead of initiating or prosecuting a foreclosure action. It is important to analyze the costs of proceeding and possibly owning the property versus the benefits offered by the proposed resolution.
   6. Deeds-in-Lieu of Foreclosure: As an alternative to allowing the customer to maintain the property, a "deed in lien of foreclosure" is an option. It is important to know the risks associated with this option before accepting such a deed.
   7. Acceptance of Late Payments after Acceleration: In Florida, post-acceleration payments may be accepted without waiving the right to the accelerated balance, if the Bank makes it clear to the customer that no waiver has occurred.

IV. The Process when the Bank is a Subordinate Mortgage Holder

1. Special Considerations When Initiating Foreclosure
   1. Often, the Bank may wish to foreclose a second mortgage on real property.
   2. Ifthe Bank successfully prosecutes the foreclosure action and purchases the property at the judicial sale, the Bank takes the property subject to the first mortgage.
2. Protecting Interest When Foreclosure Initiated by First Mortgage Holder
   1. Answer: Once an Answer is filed on behalf of the Bank in the first mortgage holder's action, the parties to the action and the Court are on notice of the Bank's interest in any surplus proceeds from the judicial sale.
   2. Cross-claim: A Cross-claim can be filed in the first mortgage holder's action to foreclose the Bank's mortgage and/or seek damages for breach of the note.
   3. Bidding at Judicial Sale: If the Bank has significant equity in the property, it may wish to bid at the judicial sale to protect its interest.