How Does A Home Foreclosure Affect My Credit?

The prospect of losing your home is understandably a terrifying one. Home foreclosure not only means the loss of your home, but it can also damage your credit score, making it difficult to purchase another home in the future. Unfortunately, the impact of a home foreclosure can sometimes last up to seven years.

Familiarizing yourself with the Florida home foreclosure process is the first step to understanding your options if you are facing foreclosure. The legal team at Handin Law can help you understand how home foreclosure impacts your credit and help you understand the foreclosure process, your rights, and the options you have.

What Is Home Foreclosure?

A foreclosure happens if a homeowner can’t keep up with mortgage payments. This gives the lender — usually a bank — legal rights to take back the property to recover the money that is owed. Home foreclosure is the process by which a lender seeks to recover the outstanding balance on a home loan from a borrower who has defaulted on their mortgage. The balance is recovered through the sale of the property at an auction, and the funds from the sale are used to settle the outstanding balance on the loan. Foreclosure is also referred to as ‘home repossession.’

Missed payments can happen during unforeseen circumstances, such as job loss or medical debt. Foreclosure often happens after missing, on average, four consecutive payments, resulting in 120 days of delinquency.

Types Of Foreclosure

Typically, the foreclosure process involves a court filing by the lender. The amount of time between filing and the actual foreclosure depends on the local laws, as well as which type of foreclosure applies to the situation:

• Judicial foreclosure: This is when the lender initiates the foreclosure by filing a claim after the third missed payment, and the homeowner receives a letter indicating of foreclosure if the payments aren’t made within 30 days.
• Power of sale (nonjudicial): This is when a lender conducts an auction to sell a foreclosed home.
• Strict foreclosure: This is when the lender files a suit against the at-fault borrower. However, this is only allowed in Connecticut and Vermont.

It is important to note that in Florida, foreclosure is a judicial process (not all states are ‘judicial foreclosure’ states). This means that the lender must bring a civil claim against the borrower in court and seek the court’s permission to repossess and sell the property at an auction. While each home foreclosure is different from the next, depending on the circumstances of the borrower and their response to the proceedings, foreclosures typically take between six months to a year (or longer if unforeseen obstacles cause a delay in the legal proceedings).

The Florida Foreclosure Process

Though the Florida foreclosure process is complicated and lengthy, there are many points at which you will have the opportunity to negotiate with the lender with the aim of keeping your home. Below are the key stages in the process so that you are empowered to act quickly and decisively if you ever find yourself at risk of home foreclosure.

Notice Of Default

All foreclosures begin with a default, i.e. the borrower fails to make their monthly mortgage payment. While some lenders will begin foreclosure proceedings after one missed payment, usually, lenders will commence proceedings when the borrower has missed about three payments in a row.

The proceedings officially commence when the lender files a ‘notice of default’ at the office of the county recorder, which formally notifies the borrower that they are in default. The notice will set out the amount owed and give the borrower a period to remedy the default (i.e., to catch up on their missed payments). During this period, the borrower has an opportunity to negotiate with the lender to attempt to avoid home foreclosure.

Lis Pendens, Summons And Complaint

If the borrower fails to remedy the default or reach an agreement with the lender, then the lender will file a ‘lis pendens’ (‘suit pending’) — this is a public document that essentially gives notice that foreclosure proceedings are imminent. Once the lis pendens has been filed, the lender has up to 120 days to serve the borrower with a summons and complaint. A summons notifies the borrower that foreclosure proceedings have been initiated against them and sets out a timeline (usually only 20 days) for them to respond to the allegations set out in the complaint.

Default, Summary, And Final Judgment

If the borrower fails to respond to the complaint, the lender may seek to obtain default judgment against them. If they do respond but the response does not disclose a valid defense, the lender may seek to obtain summary judgment against them. If a response disclosing a valid defense is filed, then the proceedings will move to the trial preparation phase. If the foreclosure goes to the trial phase, the length of the home foreclosure process will be greatly extended, as both parties will need to gather and present their evidence and argue their case before the court.

Default Judgment: If the lender files for default judgment, the court will consider the lender’s case in the absence of any response or defense from the borrower. If the court decides to grant the default judgment, it will issue a final judgment that sets out the final amount owing by the borrower (including any interest and liability for the lender’s legal costs). The court will also set a date for the public auction of the property, which will usually be about a month following the date of the final judgment.

Summary Judgment: A lender may apply for summary judgment when a borrower has filed a response to the complaint, but the response lacks sufficient evidence. By filing for summary judgment, the lender is essentially arguing that there would be no point in going to trial because the borrower clearly lacks a valid defense. If the court grants the summary judgment, they will enter a final judgment (as described above), and the home foreclosure sale will proceed.

Auction And Right Of Redemption

The date of the foreclosure sale will have been set by the court in its final judgment (regardless of whether that judgment was issued in default judgment, summary judgment, or trial proceedings). A public auction will be held, and the home will be sold to the highest bidder.

However, in Florida, the borrower has a ‘right of redemption.’ In terms of this right, the borrower has ten days following the sale of their home by public auction to remedy their indebtedness and prevent the sale from going through. The borrower will need to pay the full amount owing on the mortgage, plus any interest and fees, in order to exercise their right of redemption. Once the ten-day period has lapsed (without the borrower exercising their right of redemption), the county clerk will issue a certificate of title to the new owner.

How Does Foreclosure Affect Your Credit?

Home foreclosure is a hard thing for a homeowner to experience. Beyond the loss of your home, it can significantly damage your credit score. The impact of a home foreclosure can sometimes last up to seven years, making it difficult to secure new credit or purchase another home during that time.

Can Future Lenders See A Prior Home Foreclosure?

Lenders see a foreclosure as one of the most serious events that can happen, next to bankruptcy. The hard truth is that some mortgage lenders will not work with potential borrowers with a foreclosure on their credit reports. However, some may be able to work with a borrower applying for a mortgage a few years after the foreclosure, should borrowers meet all other necessary criteria for a loan.

Can A Home Foreclosure Be Removed From My Credit Report?

Unfortunately, home foreclosures can’t be removed from credit reports before expiration. Should it remain past that time, or if you made the necessary payments before it could happen, then you are able to use a credit report dispute process to have your credit report corrected.

Post-Foreclosure Proceedings

In some cases, the foreclosure sale is not the end of the home foreclosure process. Homeowners should be aware that Florida is a ‘right of recourse’ state. That means that if the proceeds from the foreclosure sale are insufficient to cover the amount owing on the mortgage, the lender can still initiate further proceedings to cover the amount outstanding from the borrower and may seek to execute against other assets that the borrower may have.

Tips To Improve Credit After Home Foreclosure

A home foreclosure is a challenging event, but it’s not the end of the world. It can often take some time, but rebuilding your credit after a foreclosure is possible. Here are a few tips to get started:

Make Sure Your Bills Are Paid On Time

This is one of the simplest ways to build positive credit. Write the due dates down in your calendar, on a sticky note on your desk, or wherever you will see it.

Keep Your Credit Card Balance Low

Credit cards are only good when payments are made regularly every month. There is no benefit to carrying a balance from month to month. Paying it off in full every month is a great way to not only build credit, but also cut down on interest charges.

Have An Emergency Fund

An emergency stash of money can help get you out of an unexpected financial rut. When your car breaks, or a medical emergency, this fund can keep you from going into debt. Financial experts recommend at least six months’ worth of savings for an emergency fund. However, if that’s unrealistic for you, start smaller: set aside enough money for a week’s worth of groceries, or one month of a mortgage, and build from there. Consider setting up an automatic deposit from every paycheck that goes into this account.

Be Wary Of Credit Repair Companies

Tempting though they may be, credit repair companies that promise to rebuild your credit quickly don’t always work. Unfortunately, they can sometimes make your existing debt worse with their fees and often can’t do anything for your credit that you can’t do yourself.

How To Avoid Home Foreclosure In Florida

There are a number of options that you can explore to try to avoid home foreclosure. These include renegotiating the terms of the mortgage with the lender, loan reinstatement, and signing a deed-in-lieu of foreclosure. And, as the process outlined above makes clear, there are several opportunities within the foreclosure process itself to come to an agreement with your lender before the actual foreclosure sale takes place.

How A Lawyer Can Help Prevent Home Foreclosure

If you receive a foreclosure notice in the mail, a foreclosure defense attorney at Handin Law can help. We can assist you in delaying the foreclosure for as long as possible and help you understand your options, such as:

• Modifying your existing loan
• Ensuring that your lender is acting fairly
• Mediating between you and your lender to work out a plan
• Defending you in court
• Providing advice during the foreclosure process

To give yourself the best chance of saving your home, you will need a reliable foreclosure defense attorney by your side. At the offices of Gary I. Handin, P.A., we have years of experience in assisting distressed homeowners facing foreclosure proceedings. We will advise you on your options and do our utmost to help you achieve the best outcome for you and your family.

Home Foreclosure Attorneys In South Florida

Home foreclosure is a devastating experience: one you don’t have to walk through alone. Working with a foreclosure attorney can often make the difference between losing and keeping your home. To learn more about all our legal services, call the Law Offices of Gary I. Handin, P.A. at 954-796-9600 for a consultation.