Florida’s Foreclosure Process: Explained in 5 Phases

Going through foreclosure can be an emotionally draining and financially taxing experience, but it doesn't have to be that way. In this article, join Pro Buyer Haven as we explain the foreclosure process, divided into five phases.

Phase 1: Payment Default

The exact definition can vary lender by lender, but this process usually happens when you miss paying your mortgage payment at least once. Shortly after, your lender will try to send a missed payment notice through mail or phone.

After sending the notice, you now have a grace period until the 15th day of the month, during which you'll only pay a late payment fee.

If things drag out and you miss your second round of mortgage payments, the lender will follow up again by telephone. They are still willing to provide a repayment plan for you to catch up on the late payments, and terms vary depending on the lender.

However, if you go up to three months without a loan payment, the real problem starts here. At this stage, the lender will send out a demand letter (or breach letter) stating the amount in delinquency and highlight options to avoid foreclosure action. You have up to 30 days in advance to bring the loan payments current.

Phase 2: Notice of Default (NOD)

After the fourth month of missed payments, the lender issues a Notice of Default (NOD). The NOD basically kickstarts foreclosure proceedings and outlines the total amount you owe in missed payments, interest, and other fees.

If you're wondering why they're taking their sweet time to send you a NOD, you're protected under federal law (12 C.F.R. § 1024.41 Foreclosure Procedures). In Florida, lenders can only pursue legal action until the loan is over 120 days old.

Take note that NODs also serve as public notice of the homeowner's delinquency and are recorded with the county. However, not to worry—you can still correct the foreclosure action. You have plenty of time, too.

Florida foreclosure laws require specific procedures, which give you a lot of time to sort it out. What you can do at this time is to request a loan modification or mitigate losses, whatever fits your situation.

Phase 3: NOTD

The pre-foreclosure process may vary from state to state, but it ultimately boils down to two types: non-judicial foreclosure and judicial foreclosure. Since we're in Florida, we only have the latter, we'll still discuss the definition of the two for better understanding.

A nonjudicial foreclosure, or a power of sale foreclosure, refers to a quick way for lenders to retrieve the property in case you default without needing a court order to start the foreclosure process.

Here, you and the lender agree to sell your house if you can't follow through mortgage payments. If the loan defaults, the lender can directly sell the house without going to court

For judicial foreclosures, the lender will first file a foreclosure lawsuit but will have to first prove that they gave you loss-mitigation options. Property owners also have the right to dispute the suit and proceed to litigation.

However, if the court favors the lender, either the foreclosure trustee or the lender's attorney will schedule a sale date. A notice of trustee's sale (or notice of sale) is then recorded in the county and outlines when and where the sale will happen as well as the minimum opening bid for public auction.

The time between Phases 1-3 varies from state to state but can be as short as 2-3 months. In this timeframe, you can still enter the redemption period and make payments but be prepared to shoulder the lender's attorney fees should you reach Phase 3.

Phase 3: Trustee's Sale

At this stage, the property is now up for public auction and anyone can bid. The lender (or their law firm) calculates a minimum starting bid based on how much is owed on the loan, plus any unpaid property taxes, liens, or sale costs.

Once they identify the highest bidder who meets the requirements, they award them the trustee's deed upon sale—concrete proof that they immediately own the property.

REO Properties

If the property wasn't sold during the public auction, the lender will then become the owner by default. This makes it a bank-owned property— a Real Estate Owned (REO) property. Lenders can now either hire an REO asset manager or sell the property through a real estate brokerage.

REO properties generally require extensive repairs, but lenders sweeten the deal by offering it at a steep discount and removing some of the tax liens.

Phase 5: Eviction Notice

Homeowners moving out due to the eviction notice.

As soon as Phases 1-3 rollout and another person wins the property, the lender will send you an eviction notice. This notice outlines that property owners will have to evacuate if they are still living on the property.

In this time period, you will have several days to collect and remove any personal belongings. Afterward, local law enforcement will come to dispose of or impound any remaining items.

Key Takeaways

What I outlined above will guide you through the foreclosure process from start to finish.

However, why let it drag on when you can stop the process as early as Phase 2? You can sell your house even when facing foreclosure, but you have a very short timeline to work with.

My advice? Take action immediately once your bank sends you a NOD. If you don't have the funds or time to catch up on payments and the auction date is approaching fast, you can always contact me for a no-obligation, all-cash offer.

Note: This article only informs you about the foreclosure process. It's not a substitute for legal advice; you should always consult a legal professional for guidance.

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