Exploring non-judicial foreclosure process

Since Florida is leading the nation in foreclosed properties, second only to California, it was no surprise for Historic City News reporters to learn that yesterday’s House Civil Justice Subcommittee heard a presentation that suggested cutting the courts out of the foreclosure process.

In August alone, 226 homes were added to the 1,768 foreclosed homes reported in St. Johns County; according to RealtyTrac.

Governor Rick Scott, House Speaker Dean Cannon and Senate President Mike Haridopolos all say they are interested in considering legislation to change Florida laws so judges won’t have to referee foreclosures.

At issue is the amount of time and cost associated with the way foreclosures have to be handled here. In case you did not know, there are states that include courts in the process — and those that do not.

There are only five states that practice non-judicial foreclosures only:
Michigan, New Hampshire, Tennessee, Utah and West Virginia. Washington D.C. also practices non-judicial foreclosures.

There are 20 states that practice judicial foreclosures only:
Connecticut, Delaware, Florida, Illinois, Indiana, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Nebraska, New Jersey, New Mexico, New York, North Dakota, Ohio, Pennsylvania, South Carolina and Vermont.

There are 25 states that practice both judicial and non-judicial foreclosures:
Alabama, Alaska, Arizona, Arkansas, California, Colorado, Georgia, Hawaii, Idaho, Iowa, Minnesota, Mississippi, Missouri, Montana, Nevada, North Carolina, Oklahoma, Oregon, Rhode Island, South Dakota, Texas, Virginia, Washington, Wisconsin and Wyoming.

The goal, if approved, will be to move the time it takes for lenders to foreclose on property ahead by as much as a year. “The bottom line is that foreclosures take longer and are more expensive in states that involve courts,” said state economist Amy Baker.

Supporters are saying if Florida changes from judicial foreclosure to non-judicial foreclosure, lenders will be able to get houses back onto the real estate market faster; which they say will boost the economy. Opponents say it puts property owners at the mercy of banks.

States that do not require court action include Michigan, Arizona, California and Nevada — other states with high foreclosure rates. On average, foreclosure proceedings in those states take from 392 days in Arizona, to 511 days in California. In Florida it takes 638 days.

Foreclosure proceedings in Florida are among the slowest in the nation; averaging 638 days according to a report produced by Jacksonville-based Lender Processing Services – Applied Analytics. Lawmakers are considering removing judges from proceedings to speed up the process.

STATES WITH THE QUICKEST FORECLOSURES (IN DAYS):
Utah: 388
Colorado: 388
Idaho: 381
Alaska: 379
Wyoming: 367

STATES WITH THE SLOWEST FORECLOSURES (IN DAYS):
New York : 664
Florida : 638
Hawaii : 580
New Jersey : 563
Maine : 551

The Florida Bankers Association pushed unsuccessfully last year to change Florida to the nonjudicial foreclosure process. Much of Florida’s housing crisis is caused by a glut of homes awaiting foreclosure, said Anthony DiMarco, executive vice president of government relations for the association.

“If you can move more quickly, properties can get back on the market, and it will stimulate the economy,” he said. “You won’t have blight. Property taxes will get paid. Condo fees and homeowners association fees will be paid. People will buy paint and furniture.”

Comparing the process — you decide for yourself:

Judicial foreclosures are processed through the courts, beginning with the lender filing a complaint and recording a notice of Lis Pendens. The complaint will state what the debt is, and why the default should allow the lender to foreclose and take the property given as security for the loan. The homeowner will be served notice of the complaint, either by mailing, direct service, or publication of the notice, and will have the opportunity to be heard before the court. If the court finds the debt valid, and in default, it will issue a judgment for the total amount owed, including the costs of the foreclosure process. After the judgment has been entered, a writ will be issued by the court authorizing a sheriff’s sale. The sheriff’s sale is an auction, open to anyone, and is held in a public place, which can range from in front of the courthouse steps, to in front of the property being auctioned. Sheriff’s sales will require either cash to be paid at the time of sale, or a substantial deposit, with the balance paid from later that same day up to 30 days after the sale. At the end of the auction, the highest bidder will be the owner of the property, subject to the court’s confirmation of the sale. After the court has confirmed the sale, a sheriff’s deed will be prepared and delivered to the highest bidder, when that deed is recorded, the highest bidder is the owner of the property.

Non-judicial foreclosures are processed without court intervention, with the requirements for the foreclosure established by state statutes. When a loan default occurs, the homeowner will be mailed a default letter, and in many states, a Notice of Default will be recorded at approximately the same time. If the homeowner does not cure the default, a Notice of Sale will be mailed to the homeowner, posted in public places, recorded at the county recorder’s office, and published in area legal publications. After the legally required time has expired, a public auction will be held, with the highest bidder becoming the owner of the property, subject to their receipt and recording of the deed. Auctions of non-judicial foreclosures will generally require cash, or cash equivalent at the sale, or very shortly thereafter.

It is important to note that each non-judicial foreclosure state has different procedures. Some do not require a Notice of Default, but start with a Notice of Sale. Others require only the publication of the Notice of Sale to announce the sale, with no direct owner notification required.