Last Updated on July 13, 2024 by Admin
Judicial foreclosure is a process no homeowner wants to experience. Yet, many Florida property owners will find themselves in this situation when they fall behind on mortgage payments. Lenders who aren’t paid on time have the right to petition the courts for permission to foreclose and take possession of the property. They can do so as long as the debtor has been in arrears for at least 120 days.
So, what does it mean for a homeowner to face foreclosure? What is pre-foreclosure, what can they do about it, and what happens if they can’t come up with the payment? Let’s take a look at some of the considerations and options for those facing this situation.
Table of Contents
What Is Pre-foreclosure?
There are three periods related to foreclosure. The act of foreclosure is when the bank takes ownership of the property, and it goes up for sale. At this point, homeowners have no way of preventing it. There is also the post-foreclosure period, where debtors deal with the aftermath and the pre-foreclosure period. The pre-foreclosure period is the longest and most stressful. This is the time between the lender beginning proceedings to give debtors notice of the intent to foreclose and the final decision. It starts when homeowners default on their mortgage, and the lender submits that petition. They will then notify the homeowner of the situation and give them time to rectify the issue. If the debtor can either clear the debt or make enough of an effort to improve the situation, the lender may not follow through. Homeowners have 30 days to do so.
Avoiding Foreclosure on Florida Homes
This 30-day period offers a small window of time for those owing money to pay up. Homeowners are advised to put this to good use and take advantage of all the resources they can to find a solution. There are ways to avoid foreclosure as long as you can come to an agreement with your lender. So, it’s always best to contact them and set up a meeting as soon as you get a warning about the default on the mortgage.
There may be an opportunity to set up a payment plan of some kind to help you get your payments back in line with where they should be. The lender may agree to a smaller payment for a while and then additional payments at a later date. This is easier if you can prove that any difficulty in paying the mortgage was temporary and due to unforeseen circumstances. There may also be a way to refinance the mortgage into a new plan if the lender is willing. There’s no guarantee that these methods will work, but you don’t know unless you make that initial inquiry.
The other option is to look into declaring bankruptcy. This isn’t ideal because it will have a significant impact on your credit rating and ability to borrow money in the future. Yet, lenders can’t follow through on a foreclosure warning once occupants are declared bankrupt. You would keep the home but at a cost. Another drastic option is to apply to sell the home for a cost lower than the mortgage and give that money and the remainder to the lender. This option might not seem worth it because it would still result in handing the ownership of the home to someone else. Unless that new owner is family or a friend willing to buy it for you, you’re still going to have to move out. The only upside is that you won’t have to go through the full foreclosure process and the feelings of guilt and humiliation that come with it.
What Happens After 30 Days?
A common question from those in this position is: when is it too late to stop foreclosure? If you get to that 30-day point and cannot come to an agreement and aren’t filing for bankruptcy, foreclosure is the next step. The bank will take over ownership of the property, and it will go up for sale. Foreclosure auctions either take place through the bank that reclaimed the property or through the local sheriff. Either way, they will auction the property off to the highest bidder to get as much of the money back as possible.
You and your family will need to find somewhere else to live and move everything out so the property can go up for auction. This is something you will need to have in mind during those 30 days of negotiating against foreclosure. You need a backup plan in place just in case you can’t avoid foreclosure. This could mean putting possessions in storage and staying with family while you look for a new home.
A final point to keep in mind when facing foreclosure is that it doesn’t just go away once the house is sold. You could find a new property and get your finances back on track over the next few months. However, you will get a foreclosure notice on your credit report. This is another reason why declaring bankruptcy might not be the worst idea long-term. Either way, the situation will affect your credit. The foreclosure notice can show up within a month or two and stay in place for seven years. By that point, you could be a long way from your current financial situation, with a great career and growing family, but that foreclosure will still be against your name.
Avoid Foreclosure As Best You Can
What’s clear here is that whether you end up selling the home yourself, having it foreclosed on, or declaring bankruptcy, there are some serious implications to missing mortgage payments. It is crucial to see all you can to avoid these outcomes by working with your lender on a payment plan or refinancing. You also need to get to work on this straight away because of those 30 days. Yet, there is no guarantee the lender will say yes and withdraw their petition for judicial foreclosure. The best approach is to expect the worst, prepare for the best, and maintain as much control as possible.
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