Effects of Foreclosure

Effects of Foreclosure

Effects of foreclosure can vary greatly based upon a large number of factors. One of the most important factors that may determine the effects of foreclosure can be the way a homeowner responds to foreclosure proceedings. Typically, a homeowner who responds immediately to foreclosure proceedings may find a more favorable outcome than one who waits until the very last minute.

Homeowners are advised to learn about the various effects of foreclosure in order to prepare themselves accordingly. Homeowners who are aware of the many potentially negative effects of foreclosure may be motivated to act on a timelier basis than homeowners who are unaware of the potentially harmful effects of foreclosure.

Negative Effects of Foreclosure

The negative effects of foreclosure could potentially affect homeowners, homeowner’s associations, mortgage lenders and even the United States’ housing market depending upon how widespread and severe the problems are.

Several negative effects of foreclosure may include:

  • Reduced Credit Score – A homeowner’s credit score can take some serious damage after letting a home go into foreclosure. While it is difficult to say with perfect accuracy, some credit scores may drop between 100 and 300 points. Because damage to credit scores can take a long period of time to repair, this can prevent certain difficulties in other places in a homeowner’s life.
  • Losing a Home – Feeling kicked out of your own home can cause immense emotional distress. In addition, apart from having to find a new place to live, homeowners who have lost their homes to foreclosure also typically have great difficulty in purchasing a new home.
  • Debt Forgiveness – If a mortgage lender forgives a portion of a homeowner’s debt, the IRS may consider this as a form of taxable income. Homeowners may be required to pay taxes on any amount of debt that is forgiven by mortgage lenders.
  • Reduction in Property Values – As homes go into foreclosure, neighboring properties can experience reductions in property value. This has the potential to affect entire neighborhoods and communities which are plagued with foreclosed homes.
  • Future Borrowing Rates – Mortgage lenders do not typically favorably view homeowners who have experienced a foreclosure. As a result, the mortgage lenders may only offer smaller loans with very high interest rates.
  • Deficiency Judgment – Mortgage lenders may file a lawsuit against homeowners seeking a deficiency judgment in an effort to recover money owed as a result of foreclosure. This commonly occurs when the final sale price for a home in foreclosure does not cover the outstanding balance on the mortgage.

Deficiency Judgment

A deficiency judgment may occur when a mortgage lender pursues legal action against a borrower to recover an unpaid debt on a foreclosed property. Mortgage lenders may choose to file a deficiency judgment lawsuit when they are still owed money after a short sale or foreclosure. Homeowners in foreclosure are encouraged to learn as much as possible about deficiency judgments in order to have the best opportunity at defending against them.

How Do Deficiency Judgments Work?

When a mortgage lender forecloses on a home, a deficiency judgment may not occur in every instance. For a mortgage lender to obtain a deficiency judgment, they are commonly required to file a motion for a deficiency judgment outlining the foreclosed home’s property value and the remaining unpaid balance on the mortgage. Mortgage lenders may also choose to seek unpaid interest, penalties and legal fees with the deficiency judgment as well.

Homeowners may choose to defend the motion by contesting the lawsuit. A hearing is then likely to be held where mortgage lenders can present evidence demonstrating to the court how the property’s value on the sale date was less than remaining balance on the mortgage. If the court finds the foreclosed home was worth less than the remaining balance on the mortgage, they may approve the mortgage lender’s request for a deficiency judgment.

After a mortgage lender achieves a deficiency judgment, they may be able to garnish wages and/or place a lien on the debtor for additional money.

Defending Against a Deficiency Judgment

Defending against a deficiency judgment can be a very difficult task without the help of an experienced attorney. Homeowners may be able to build a strong case against a deficiency judgment with evidence of predatory lending, robosigning, and/or some other discover of fraudulent documents filed in the foreclosure case. Additionally, filing for bankruptcy may be a viable option for defending against a deficiency judgment lawsuit. Homeowners may benefit greatly from speaking with an attorney about how to respond to a deficiency judgment lawsuit.

What is the Eviction Process in Florida?

The eviction process in Florida outlines a series of steps and legal procedures a landlord must take in order to legally remove a tenant. While some distressed homeowners may be worried they can be evicted immediately for nonpayment of rent, the entire process generally takes at least three weeks. Florida renters and landlords may both mutually benefit from gaining a clear understanding of how the eviction process in Florida works.

Eviction Process in Florida – Step 1: Written Notice

Generally, the first step in the eviction process in Florida is a written notice delivered from the landlord to the tenant. The eviction notice usually outlines the cause for eviction and the amount of time the tenant has to take action before eviction.

Common causes for eviction in Florida can include:

    • Nonpayment of rent

For nonpayment of rent, tenants generally have 3 days to pay the entire past due rent in full or vacate.

    • Eviction for cause

For eviction for cause, tenants generally have 7 days to correct any violations of the lease agreement or vacate.

    • Termination of rental agreement

In the case that there is not a written rental agreement, or the lease is not designated for any specific length of time, a landlord may choose to end the lease without reason. This can occur when a landlord provides written notice of the termination of rental agreement. If the rent is paid monthly, tenants are generally provided with 15 days of notice before the rent is due. If the rent is paid weekly, the notice of the termination is typically given at least 7 days before the rent is due.

Eviction Process in Florida – Step 2: Summons and Complaint

Typically, the next step of the eviction process in Florida takes place after a tenant does not pay the outstanding rent, fix the violation(s) of the lease agreement, and/or fails to leave after termination of the lease.

When these issues are not addressed by the tenant, the landlord may choose to file a complaint with the Clerk of the Court. A complaint and summons are then usually served upon the tenant by a certified process server or county sheriff. If the attempts to serve the tenant fail twice, the papers may be posted on the tenant’s door.

Once the complaint and summons have been served or posted, the tenant generally has 5 days to respond to the complaint. The 5 days does not include weekends and holidays and begins on the date after the tenant was served.

Tenants who are served with a summons and complaint from their landlord should consider contacting an attorney immediately to explore eviction delay and/or avoidance options. Waiting until the last minute may severely limit a tenant’s available options.

Eviction Process in Florida – Step 3: Court Hearing

Once the tenant responds to the summons and complaint by either depositing the outstanding rent with the court or filing a motion to determine the rent, the next step in the eviction process in Florida is typically a court hearing. The court hearing may be scheduled by the tenant or landlord, but if neither party schedules a hearing then the judge may set the date.

At the hearing, each party should have an opportunity to present their case. In the case that the landlord wins, a judgment for possession will likely be ordered. Landlords win automatically if tenants do not attend the hearing.

Eviction Process in Florida – Step 4: Eviction

After a court hearing, the next step in the eviction process in Florida is typically eviction if the landlord wins. The court generally issues a writ of possession to the sheriff after a judgment for possession has been obtained.

Once the sheriff posts the writ on the tenant’s property, the tenant then typically has 24 hours to vacate. The landlord or sheriff may forcibly evict the tenant and padlock the door with or without the tenant’s belongings inside. This usually marks the end to the eviction process in Florida.