Can a lien be placed on my deceased mother's homestead for investment properties in foreclosure?

Full Question:

If my mother passes away with investment properties in foreclosure, can a lien be placed on her homestead property to satisfy the foreclosure liens?
02/26/2009   |   Category: Civil Actions ยป Liens   |   State: Florida   |   #15374

Answer:

Executors and administrators are the representatives of decedents' estates and have the responsibility of administering and settling those estates. An executor is nominated by the testator in his or her will for the purpose of executing the will. An administrator is the court-appointed representative of an intestate estate (when a person dies without a will) and is responsible for administering and settling the estate pursuant to the state statutory rules of descent and distribution. Responsibilities of executors and administrators include gathering up and protecting the assets of the estate, obtaining information in regard to all beneficiaries named in the will and any other potential heirs, collecting and arranging for payment of debts of the estate, approving or disapproving creditor's claims, making sure estate taxes are calculated, forms filed and tax payments made, and in all ways assisting the attorney for the estate.

There are two main classes of creditors, to whom debts may be in default: secured and unsecured. The distinction directly affects the outcome of a debt collection matter. A secured loan is one that requires the debtor to pledge something of value as collateral for the loan. Home mortgages and auto loans are common examples affecting most consumers. In each of these two examples, the purchased house or the purchased automobile becomes the collateral for the loan, and the lender has a "security interest" in the collateral/property that secures the debt. When a debtor defaults in payments, the "secured creditor" can simply repossess the car or house. On the other hand, most credit card debts, revolving credit at retail stores, student loans, etc., are unsecured debts. The "general" (unsecured) creditors must file suit and win a judgment against the debtor before they can seize or sell any assets or belongings of a debtor to satisfy the debt. Once the general creditor has obtained a judgment against a defaulting debtor, the general creditor stands as a secured creditor who may then move on to levy liens or writs of execution against a debtor's assets and personal property.

A lien is a claim to property for the payment of a debt, typically one connected to the property. It is the right to retain the lawful possession of the property of another until the owner fulfills a legal duty to the person holding the property, such as the payment of lawful charges for work done on the property. The right of lien generally arises by operation of law, but in some cases it is created by express contract. There are two kinds of liens; particular and general. When a person claims a right to retain property, due to money or labor invested in that property, it is a particular lien. Liens may arise by express contract; from implied contract, as from general or particular usage of trade; or by legal relation between the parties, such as created with common carriers and inn keepers. In certain circumstances, the lien holder may foreclose on the property if the debt is not paid in full. There are several types of liens, all of which could cloud the title and prevent the seller from conveying marketable title to the buyer. In some states, a mortgage is regarded as a lien, not a complete transfer of title, and if not repaid the debt is recovered by foreclosure and sale of the real estate.

A judgment lien is created when a court grants a creditor an interest in the debtor's property, based upon a court judgment. A judgment lien can be filed if an actual judgment in a lawsuit is obtained from a court. Such cases include failure to pay a debt, including credit cards, bank loans, or deficiency judgments on repossessed vehicles. In some circumstances, judgments can be enforced by sale of property until the amount due is satisfied. A plaintiff who obtains a monetary judgment is termed a "judgment creditor." The defendant becomes a "judgment debtor." Judgment liens may be created through a wide variety of circumstances. For example, if a person negligently injures someone in an accident, the injured person is likely to sue for damages. If the insurance doesn't cover the judgment, a judgment lien may be placed against the negligent person's property to secure payment of the claim to the injured party. If the debt is not paid, the judgment creditor can then seek to enforce the judgment by garnishing wages, seizing a bank account, or placing a lien against the debtor's property. After the judgment creditor places a lien upon the attached property, the next step in the collection process is to conduct a sale of the attached property to satisfy the judgment debt. If a lien were placed on a home, the judgment creditor would then seek to foreclose on the property, in the same way a mortgage holder such as a bank would foreclose if it were not paid. Laws regarding judgment liens vary by jurisdiction, so local laws should be consulted for specific requirements.

Foreclosure is the procedure by which a party who has loaned money secured by a mortgage or deed of trust on real property (or has an unpaid judgment), forces the sale of the real property to recover the money due, unpaid interest, plus the costs of foreclosure, after the debtor fails to make payment. There are different types of foreclosure, including foreclosure by judicial sale, which involves the sale of the mortgaged property done under the supervision of a court, with the proceeds going first to satisfy the mortgage, and then to satisfy other lien holders, and finally to the mortgagor. Judicial foreclosure is typically used when the amount due is greater than the equity value of the real property, and the lender wishes to get a deficiency judgment for the amount still due after sale. Foreclosure by power of sale, involves the sale of the property by the mortgage holder not through the supervision of a court when a power of sale clause is included in the mortgage. This type of foreclosure is often subject to judicial review at a later date due to issues about title that must be resolved by the court, including actual defects in the deed, and the priority of various lien holders and lessees on the property. In many jurisdictions the mortgage holder is prohibited from seeking a deficiency judgment if the holder chooses to sell the property through extra-judicial means. In many jurisdictions, a deed of trust is required in order to conduct a foreclosure by the power of sale. A voluntary foreclosure involves selling the home to the lender. Voluntary foreclosure may be pursued to minimize the damage to the debtor's credit record associated with involuntary foreclosure. In a voluntary foreclosure, the debtor may not be held liable if the home sells below the debt amount.

When the foreclosure sale is not enough to satisfy the amount of the mortgage, under certain circumstances, the mortgage holder may bring a deficiency judgment against the mortgagor to make up the difference. If the purchaser fails to make the mortgage payment the property is foreclosed and title is obtained by the lender through a legal procedure. The property is then typically sold to pay the mortgage and a deficiency between the sale price and the outstanding balance of the mortgage usually exists. Some states have anti-deficiency laws which protect purchasers of residential real property used as primary residence. Under some anti-deficiency laws, if the mortgage is a purchase money mortgage for the purchase of a dwelling occupied by the purchaser, the purchaser will not be held responsible for any deficiency. The lender can only recover the property and the proceeds of a subsequent sale. The purchaser does not pay any deficit between the sale proceeds and the outstanding loan balance.

The following are Florida statutes:

702.035 Legal notice concerning foreclosure proceedings. —

Whenever a legal advertisement, publication, or notice
relating to a foreclosure proceeding is required to be
placed in a newspaper, it is the responsibility of the
petitioner or petitioner's attorney to place such
advertisement, publication, or notice. For counties with
more than 1 million total population as reflected in
the 2000 Official Decennial Census of the United States
Census Bureau as shown on the official website of the United
States Census Bureau, any notice of publication required by
this section shall be deemed to have been published in
accordance with the law if the notice is published in a
newspaper that has been entered as a periodical matter at a
post office in the county in which the newspaper is
published, is published a minimum of 5 days a week,
exclusive of legal holidays, and has been in existence and
published a minimum of 5 days a week, exclusive of legal
holidays, for 1 year or is a direct successor to a newspaper
that has been in existence for 1 year that has been
published a minimum of 5 days a week, exclusive of legal
holidays. The advertisement, publication, or notice shall be
placed directly by the attorney for the petitioner, by the
petitioner if acting pro se, or by the clerk of the court.
Only the actual costs charged by the newspaper for the
advertisement, publication, or notice may be charged as
costs in the action.

702.06 Deficiency decree; common-law suit to recover
deficiency. —

In all suits for the foreclosure of mortgages heretofore or
hereafter executed the entry of a deficiency decree for any
portion of a deficiency, should one exist, shall be within
the sound judicial discretion of the court, but the
complainant shall also have the right to sue at common law
to recover such deficiency, provided no suit at law to
recover such deficiency shall be maintained against the
original mortgagor in cases where the mortgage is for the
purchase price of the property involved and where the
original mortgagee becomes the purchaser thereof at
foreclosure sale and also is granted a deficiency decree
against the original mortgagor.

702.065 Final judgment in uncontested proceedings where
deficiency judgment waived; attorney's fees when default
judgment entered. —

(1) In uncontested mortgage foreclosure proceedings in which
the mortgagee waives the right to recoup any deficiency
judgment, the court shall enter final judgment within
90 days from the date of the close of pleadings. For the
purposes of this subsection, a mortgage foreclosure
proceeding is uncontested if an answer not contesting the
foreclosure has been filed or a default judgment has been
entered by the court.

(2) In a mortgage foreclosure proceeding, when a default
judgment has been entered against the mortgagor and the note
or mortgage provides for the award of reasonable attorney's
fees, it is not necessary for the court to hold a hearing or
adjudge the requested attorney's fees to be reasonable if
the fees do not exceed 3 percent of the principal amount
owed at the time of filing the complaint, even if the note
or mortgage does not specify the percentage of the original
amount that would be paid as liquidated damages. Such fees
constitute liquidated damages in any proceeding to enforce
the note or mortgage. This section does not preclude a
challenge to the reasonableness of the attorney's fees.

702.07 Power of courts and judges to set aside
foreclosure decrees at any time before sale. —

The circuit courts of this state, and the judges thereof at
chambers, shall have jurisdiction, power, and authority to
rescind, vacate, and set aside a decree of foreclosure of a
mortgage of property at any time before the sale thereof has
been actually made pursuant to the terms of such decree, and
to dismiss the foreclosure proceeding upon the payment of
all court costs.

702.08 Effect of setting aside foreclosure decree. —

Whenever a decree of foreclosure has been so rescinded,
vacated, and set aside and the foreclosure proceedings
dismissed as provided in s. 702.07, the mortgage, together
with its lien and the debt thereby secured, shall be, both
in law and equity, completely relieved of all effects of any
kind whatsoever resulting from or on account of the
foreclosure proceedings and the decree of foreclosure and
fully restored in all respects to the original status of the
same as it existed prior to the foreclosure proceedings and
the decree of foreclosure, and thereafter the same shall be
for all purposes whatsoever legally of force and effect just
as if foreclosure proceeding had never been instituted and a
decree of foreclosure had never been made.

702.09 Definitions. —

For the purposes of ss. 702.07 and 702.08 the words "decree
of foreclosure" shall include a judgment or order rendered
or passed in the foreclosure proceedings in which the decree
of foreclosure shall be rescinded, vacated, and set aside;
the word "mortgage" shall mean any written instrument
securing the payment of money or advances and includes liens
to secure payment of assessments arising under chapters 718
and 719 and liens created pursuant to the recorded covenants
of a homeowners' association as defined in s. 712.01; the
word "debt" shall include promissory notes, bonds, and all
other written obligations given for the payment of money;
the words "foreclosure proceedings" shall embrace every
action in the circuit or county courts of this state wherein
it is sought to foreclose a mortgage and sell the property
covered by the same; and the word "property" shall mean and
include both real and personal property.

702.10 Order to show cause; entry of final judgment of
foreclosure; payment during foreclosure. —

(1) After a complaint in a foreclosure proceeding has been
filed, the mortgagee may request an order to show cause for
the entry of final judgment and the court shall immediately
review the complaint. If, upon examination of the complaint,
the court finds that the complaint is verified and alleges a
cause of action to foreclose on real property, the court
shall promptly issue an order directed to the defendant to
show cause why a final judgment of foreclosure should not be
entered.

(a) The order shall:

1. Set the date and time for hearing on the order to show
cause. However, the date for the hearing may not be set
sooner than 20 days after the service of the order. When
service is obtained by publication, the date for the hearing
may not be set sooner than 30 days after the first
publication. The hearing must be held within 60 days after
the date of service. Failure to hold the hearing within such
time does not affect the validity of the order to show cause
or the jurisdiction of the court to issue subsequent orders.

2. Direct the time within which service of the order to show
cause and the complaint must be made upon the defendant.

3. State that the filing of defenses by a motion or by a
verified or sworn answer at or before the hearing to show
cause constitutes cause for the court not to enter the
attached final judgment.

4. State that the defendant has the right to file affidavits
or other papers at the time of the hearing and may appear
personally or by way of an attorney at the hearing.

5. State that, if the defendant files defenses by a motion,
the hearing time may be used to hear the defendant's motion.

6. State that, if the defendant fails to appear at the
hearing to show cause or fails to file defenses by a motion
or by a verified or sworn answer or files an answer not
contesting the foreclosure, the defendant may be considered
to have waived the right to a hearing and in such case the
court may enter a final judgment of foreclosure ordering the
clerk of the court to conduct a foreclosure sale.

7. State that if the mortgage provides for reasonable
attorney's fees and the requested attorney's fees do not
exceed 3 percent of the principal amount owed at the time of
filing the complaint, it is unnecessary for the court to
hold a hearing or adjudge the requested attorney's fees to
be reasonable.

8. Attach the final judgment of foreclosure the court will
enter, if the defendant waives the right to be heard at the
hearing on the order to show cause.

9. Require the mortgagee to serve a copy of the order to
show cause on the mortgagor in the following manner:

a. If the mortgagor has been served with the complaint and
original process, service of the order may be made in the
manner provided in the Florida Rules of Civil Procedure.

b. If the mortgagor has not been served with the complaint
and original process, the order to show cause, together with
the summons and a copy of the complaint, shall be served on
the mortgagor in the same manner as provided by law for
original process.

Any final judgment of foreclosure entered under this
subsection is for in rem relief only. Nothing in this
subsection shall preclude the entry of a deficiency judgment
where otherwise allowed by law.

(b) The right to be heard at the hearing to show cause is
waived if the defendant, after being served as provided by
law with an order to show cause, engages in conduct that
clearly shows that the defendant has relinquished the right
to be heard on that order. The defendant's failure to file
defenses by a motion or by a sworn or verified answer or to
appear at the hearing duly scheduled on the order to show
cause presumptively constitutes conduct that clearly shows
that the defendant has relinquished the right to be heard.
If a defendant files defenses by a motion or by a verified
or sworn answer at or before the hearing, such action
constitutes cause and precludes the entry of a final
judgment at the hearing to show cause.

(c) In a mortgage foreclosure proceeding, when a default
judgment has been entered against the mortgagor and the note
or mortgage provides for the award of reasonable attorney's
fees, it is unnecessary for the court to hold a hearing or
adjudge the requested attorney's fees to be reasonable if
the fees do not exceed 3 percent of the principal amount
owed on the note or mortgage at the time of filing, even if
the note or mortgage does not specify the percentage of the
original amount that would be paid as liquidated damages.

(d) If the court finds that the defendant has waived the
right to be heard as provided in paragraph (b), the court
shall promptly enter a final judgment of foreclosure. If the
court finds that the defendant has not waived the right to
be heard on the order to show cause, the court shall then
determine whether there is cause not to enter a final
judgment of foreclosure. If the court finds that the
defendant has not shown cause, the court shall promptly
enter a judgment of foreclosure.

(2) In an action for foreclosure, other than residential
real estate, the mortgagee may request that the court enter
an order directing the mortgagor defendant to show cause why
an order to make payments during the pendency of the
foreclosure proceedings or an order to vacate the premises
should not be entered.

(a) The order shall:

1. Set the date and time for hearing on the order to show
cause. However, the date for the hearing shall not be set
sooner than 20 days after the service of the order. Where
service is obtained by publication, the date for the hearing
shall not be set sooner than 30 days after the first
publication.

2. Direct the time within which service of the order to show
cause and the complaint shall be made upon the defendant.

3. State that the defendant has the right to file affidavits
or other papers at the time of the hearing and may appear
personally or by way of an attorney at the hearing.

4. State that, if the defendant fails to appear at the
hearing to show cause and fails to file defenses by a motion
or by a verified or sworn answer, the defendant may be
deemed to have waived the right to a hearing and in such
case the court may enter an order to make payment or vacate
the premises.

5. Require the mortgagee to serve a copy of the order to
show cause on the mortgagor in the following manner:

a. If the mortgagor has been served with the complaint and
original process, service of the order may be made in the
manner provided in the Florida Rules of Civil Procedure.

b. If the mortgagor has not been served with the complaint
and original process, the order to show cause, together with
the summons and a copy of the complaint, shall be served on
the mortgagor in the same manner as provided by law for
original process.

(b) The right to be heard at the hearing to show cause is
waived if the defendant, after being served as provided by
law with an order to show cause, engages in conduct that
clearly shows that the defendant has relinquished the right
to be heard on that order. The defendant's failure to file
defenses by a motion or by a sworn or verified answer or to
appear at the hearing duly scheduled on the order to show
cause presumptively constitutes conduct that clearly shows
that the defendant has relinquished the right to be heard.

(c) If the court finds that the defendant has waived the
right to be heard as provided in paragraph (b), the court
may promptly enter an order requiring payment in the amount
provided in paragraph (f) or an order to vacate.

(d) If the court finds that the mortgagor has not waived the
right to be heard on the order to show cause, the court
shall, at the hearing on the order to show cause, consider
the affidavits and other showings made by the parties
appearing and make a determination of the probable validity
of the underlying claim alleged against the mortgagor and
the mortgagor's defenses. If the court determines that the
mortgagee is likely to prevail in the foreclosure action,
the court shall enter an order requiring the mortgagor to
make the payment described in paragraph (e) to the mortgagee
and provide for a remedy as described in paragraph (f).
However, the order shall be stayed pending final
adjudication of the claims of the parties if the mortgagor
files with the court a written undertaking executed by a
surety approved by the court in an amount equal to the
unpaid balance of the mortgage on the property, including
all principal, interest, unpaid taxes, and insurance
premiums paid by the mortgagee.

(e) In the event the court enters an order requiring the
mortgagor to make payments to the mortgagee, payments shall
be payable at such intervals and in such amounts provided
for in the mortgage instrument before acceleration or
maturity. The obligation to make payments pursuant to any
order entered under this subsection shall commence from the
date of the motion filed hereunder. The order shall be
served upon the mortgagor no later than 20 days before the
date specified for the first payment. The order may permit,
but shall not require the mortgagee to take all appropriate
steps to secure the premises during the pendency of the
foreclosure action.

(f) In the event the court enters an order requiring
payments the order shall also provide that the mortgagee
shall be entitled to possession of the premises upon the
failure of the mortgagor to make the payment required in the
order unless at the hearing on the order to show cause the
court finds good cause to order some other method of
enforcement of its order.

(g) All amounts paid pursuant to this section shall be
credited against the mortgage obligation in accordance with
the terms of the loan documents, provided, however, that any
payments made under this section shall not constitute a cure
of any default or a waiver or any other defense to the
mortgage foreclosure action.

(h) Upon the filing of an affidavit with the clerk that the
premises have not been vacated pursuant to the court order,
the clerk shall issue to the sheriff a writ for possession
which shall be governed by the provisions of s. 83.62.

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