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What is a Mortgage Foreclosure?

When a person buys real property, often a loan is involved. The buyer typically signs a promissory note where he or she agrees to pay back the debt and then secures such obligation with a mortgage pledging the real property as collateral. In the event the borrower, known as the “mortgagor”, defaults under the terms of the note or mortgage, the holder of the note and mortgage may file suit to protect its interests. This is called a mortgage foreclosure action.

In Florida, the foreclosure of a mortgage involves a lawsuit where the holder of the mortgage and underlying note, called the “mortgagee”, asks the court to determine the amount that is due to the mortgagee/lender and then cause the sale of the mortgaged property on the “courthouse steps” to satisfy such obligation. The reason it is called a “foreclosure” action is because the lawsuit “forecloses” or wipes out any junior liens that may have attached to the property after the recording of the mortgage. All such junior lien holders will be named as defendants in the lawsuit.

If the Court finds a default occurred, it will enter a final judgment against the mortgagor in favor of the mortgagee for the total amount due under the terms of the promissory note, plus interest, court costs (which can exceed $2000), attorney’s fees, past due taxes, past due insurance, and costs of protecting the property paid by the mortgagee. The court also sets a sale date where the property is sold by the clerk of the court to the highest bidder. The mortgagee attends the sale and bids at the sale. The mortgagee gets credit against such bid for all amounts set forth in the final judgment. If the highest bidder, the mortgagee will receive title to the property by way of a certificate of title. If another party is the highest bidder and gets the property, the monies from the sale will be paid to the mortgagee to satisfy the amounts in the final judgment.

If the value of the property is less than the amount found due in the final judgment on the date of the sale, the mortgagee may seek a deficiency judgment against the mortgagor. The mortgagee has five years to obtain such a deficiency judgment.

The foreclosure process is complicated and any person involved in such a lawsuit should obtain competent legal counsel to assist them in protecting their interests.