1. Real Estate Article for the Dade County Bar News
Florida has one of the nation’s highest foreclosure rates. The recession and economic crisis of the past two years has shaped the legal landscape in which the people of Florida are currently living.
The drop in property prices and the Federal government’s stimulus incentive of an $8,000 credit for first time home buyers has given many Floridians the opportunity to acquire real estate for the first time and live the America Dream of home ownership. However, the recession has also caused many distressed homeowners to lose their homes, many times due to the lack of communication between lenders and troubled borrowers.
For a homeowner about to face foreclosure, the key factor is communication with the lender in order to avoid the unfortunate result of a foreclosure auction. The reality is that in many cases, distressed homeowners are only able to speak with their lenders in a courtroom. Fortunately, attorneys in Miami-Dade County and others across the State of Florida have answered the call of public service. Hundreds of attorneys have handled pro-bono foreclosure cases through the Miami-Dade County Put Something Back program and the Florida Bar’s Florida Attorneys Saving Homes program.
At the same time, the Miami-Dade County Circuit Court, under the leadership of Judge Jennifer Bailey, took the lead in testing a mediation program for foreclosure cases involving homestead properties. This program requires mediation early on in a foreclosure case. Using mediation to achieve settlements at the beginning stages of a case rather than later in the process is a win-win for the lender, borrower and the court system which is log jammed with foreclosure cases. Troubled borrowers have an opportunity to become current on their mortgages and the court is able to lessen their load of foreclosure cases. The initial results in Miami-Dade County proved successful enough for the Florida Supreme Court’s Task Force on Residential Mortgage Foreclosure to recommend the same court ordered mediation system
throughout the State of Florida. With the Court ordering lenders and distressed homeowners to undergo mediation, the Judiciary branch has taken a leading role in solving the economic crisis. While Miami-Dade County and the entire State of Florida is still facing a challenging economic climate and rising unemployment rates, the implementation of new legal policies and probono help from the legal community is already leading to lower foreclosure rates which may be the beginning of the road to economic recovery.
2. Deficiency judgment
Many individuals who are faced with foreclosure decide to stop making mortgage payments in the belief that the lender will take back the property and any liability related to the property will simply disappear. However, before proceeding down this road, we suggest you consult with an experienced Florida real-estate litigation attorney concerning the legal implications associated with a foreclosure.
The term DEFICIENCY JUDGMENT refers to a mortgage lender’s judgment against the borrower for the difference between the outstanding balance of the mortgage, plus costs and attorneys fees, and the value of the property foreclosed on the date of the foreclosure sale.
In Florida, a mortgage foreclosure does not automatically result in a deficiency judgment. To obtain a deficiency judgment against the borrower involved in a foreclosure, the mortgage lender must file a motion for deficiency after the foreclosure sale has taken place, and the court is then required to hold a separate evidentiary hearing on the lender’s request for deficiency liability. At that hearing, the lender has the burden of providing the court with evidence that the property’s value on the sale date was less than the balance owed. At that same hearing, the borrower also has the opportunity to present evidence which may refute the value alleged by the mortgage lender. If the court determines that the property was worth less than that of the note balance, the court will likely grant the mortgage lender’s motion for a deficiency judgment. It is important to note that the ultimate determination of value and whether to enter a deficiency judgment is within the sole discretion of the presiding judge as per Florida Statute § 702.06.
The only good news in this type of scenario is that you cannot go to jail for failing to pay a debt or a judgment. However, if judgment is entered against you and you do not pay the outstanding debt, that information can be reported to the credit bureau and made a part of your credit history for up to seven years. Further a lender who is successful in obtaining a deficiency judgment can require you to attend a deposition and give information about your income and assets. The court can also require you to provide written verification or testimony about your finances.
Finally, if a deficiency judgment is entered against you, garnishment law allows the judgment creditor to obtain a continuing writ of garnishment. This writ may order your employer to deduct money directly from your periodic wages until you have paid off the judgment. Or, in the alternative, control of your bank account may be taken in an effort to pay off the judgment. A judgment creditor may go as far as to pay a bond to the local sheriff in order to seize any personal property owned by a judgment debtor so that it can be auctioned and the proceeds applied to pay the judgment.
So, as you can see, losing your property to the lender in a foreclosure sale may really only be the beginning of a long and relentless chain of legal consequences.