Foreclosure Basics, Part 2

Yesterday we covered the idea of lien-theory and the two basic documents which detail and secure an obligation to repay in a standard financed real estate purchase (the promissory note and mortgage).

Some more important terms to know when dealing with foreclosures are:

Lis Pendens - A recorded notice of the pendency of an action.

In Latin, this means literally "suit pending". The lis pendens is the first document filed in the foreclosure process. It names the parties in the suit (the lender as plaintiff and the borrower as defendant) and expresses the lender's desire to foreclose. It used to be that the lis pendens was filed almost immediately after the second or third missed payment and the foreclosure could be consummated within 6 months. Today, however, the lis pendens may not be filed for 6-12 months after the first missed payment with the foreclosure not being consummated for an additional year to year and a half.

Final Summary Judgment of Foreclosure - A judicial decision finally disposing of a foreclosure suit.

The final summary judgment (FSJ) is a judge's decision that the plaintiff (lender) has shown sufficient grounds to foreclosure, and he grants the lender the right to take back the property. The FSJ will contain an itemization of the outstanding principal balance as of the time the foreclosure suit was filed, the accrued interest charges, attorney's fees, insurance and taxes that were paid by the lender, and so on.

After the FSJ is issued, it normally takes about a month or two to schedule the property for a courthouse sale. At the courthouse sale, the public has an opportunity to purchase the property. If a bidder's offer is insufficient to cover all, or most (at the bank's discretion), of the bank's money in the property, then the bank will outbid those bidder's and take the property back. Most often, the bank takes the property back with no contesting bids.

Ten days after the courthouse sale is finished, a Certificate of Title (CoT) will be filed to transfer title to the bank/lender/institution (securitization has made all of this a bit more complicated). Once the CoT is filed, then the bank legally owns the property.

Certificate of Title - Certified statement as to land ownership based upon examination of record title.

NOTE: Florida is not a redemption state, so the borrower (former owner) does not have the right or ability to get the property back after the final summary judgment is filed unless he can prove that the suit was filed improperly (that is the reason for the ten days between the courthouse sale and the recording of the CoT).

That lays a great framework upon which we can build our future discussions on foreclosures. Please let me know if you have any questions.

P.S. Remember, while I am a very successful real estate agent with a thorough knowledge of real estate law, I am not a real estate attorney, and do not and cannot practice law. For legal advice regarding real estate, please call Blake Hayward or John Grant of Hayward & Grant at (850) 386-4400.