Urgent: Buying delinquent note after final judgement

11 Replies

I have my attorneys looking into this now, but could use some of your collective insight and advice on this one. 

I've negotiated to buy a non performing 1st private mortgage. The lender has already obtained a final judgement 8 years ago, but does not want to go through the hassle of foreclosing on the property in order to get the deed. 

What's the proper procedure here in Florida? I've heard that the final judgement somehow "wipes out" the note. Are we negotiating to purchase the note, or the "final judgement" from the lender. We don't have much time to sort this out. 

A FJ doesn't wipe out the note.  The actual foreclosure auction would "wipe out" the lien (mortgage).  Was this a foreclosure action judgment, or just a money judgment.  If the latter, you'd have to start the foreclosure suit.  In either case, you may have some enforceability issues, although I believe the judgment is "good" for 10 years.    I'm guessing it wasn't a foreclosure action judgment, as there wouldn't have been any "hassle" in foreclosing, as an auction date would/should have been set in the judgment.  Your attorneys need to check this out.  I assume the note had a corresponding recorded mortgage against the property?

@Wayne Brooks  

It was a foreclosure action. The seller doesn't want to foreclose and possibly have to deal with the hassle of selling a distressed property.  He lives hours away and just doesn't want to deal with it. 

The note does have a corresponding recorded mortgage against the property. He had a sale date set but cancelled for personal reasons. 

This is one for the attorneys.  They'd have to reopen the case, if the judge would allow a new sale date on a 7 year old FJ.

Other than a deed in lieu, is there a way to get the deed to the property without foreclosing? And if we do have to foreclose, are there ways to increase the odds of getting it back at the foreclosure auction? 

The summary final judgment sets the sale date and judgment amount, and getting to this point is the majority of time and expense involved in a judicial foreclosure.  Because of this, I would be inclined to follow-through with the foreclosure sale if I owned the note 

A deed-in-lieu conveys title too, but the borrower must agree to and sign the agreement, there are legal costs involved in  putting the agreement together, and deed-in-lieu does not wipe out junior liens as a foreclosure sale would.  Foreclosure is far better than DIL in that you are ensured to have a clean title if you are foreclosing from 1st position.

I would do the following:

1) Ask the seller for a copy of the final judgment, then contact a foreclosure attorney to review and tell you if you can still move to sale based on this.  (You might consider contacting the attorney who handled the foreclosure previously.)

2) Get an O&E report to verify ownership and the actual lien position of the note you are purchasing.  You will also be able to see any junior liens or judgments that are on title.  (More times than not there are other encumbrances.)

Medium sure dark blue   dark grayMike Hartzog, SureMark Capital Group

Sorry I should have addressed your question of other ways to get title.  There is quit claim, but it has the same perils as DIL. 

On the question of getting the property back at the foreclosure sale, you will have the opportunity to set the starting bid price at the sale.  If you want it to sell as the sale, you can set your bid at a price below market value enough to be attractive to investors bidding at the sale.  If you want to keep the property, you max out the bid by setting it to the full amount you are owed.  This includes the principal balance plus any interest accrued while the borrower was not paying, late fees, attorneys fees, etc.  The servicer should be able to provide all of these amounts except for the attorneys fees.

Medium sure dark blue   dark grayMike Hartzog, SureMark Capital Group

Elio 

As Wayne points out the process of obtaining a Summary Judgement ("Final Judgement") the judge orders the sale of the property and sets a sale date.  While there are some details to Summary Judgement being contested and overturned, it does not seem those are apply here.  

Once a Summary Judgement is granted and the property is order by the court to be sold at auction the County Clerk must adhere to the will of the court.  A sale may be postpone but only by the power of the court or a bankruptcy filing.

In other words, once the gavel drops on a Summary Judgment the property HAS to be sent to foreclose auction.  The foreclosure auction of the Subject Property can not be stalled unless either the court specifically stays the auction or moves the auction date or if a bankruptcy filing is entered into the court.  These actions are initiated by Defendant and Plaintiff but only granted and acted upon by the court.

This particular situation, where the Summary Judgement is in hand but has not been acted on for 8 years has this issue.  My first guess is the terms being used by OP and the Seller are general non-expertise and the terms being used are not proper descriptions of where this file sits.  

I am trying to point out, it is pretty difficult to not have a sale take place once a court has ordered it.  As stated, the only stay to a sale comes from the court.  In order for the court to do such things a motion must be filed by either side and the court must first stay or postpone the sale and then the court must set aside time to deal with the motion.  

Moral of the story, I don't think you really have a Summary Judgement of Foreclosure on this asset.   I do not hear, nor based on the description, do not see, where this sounds like, IF a foreclosure action was initiated and a Motion for Summary Judgement was filed by the Plaintiff (Mortgagee) and granted by the court, that a sale would be postpone or stayed.  

I do not think the Seller is accurately describing the status of the asset in the discussion.  I am inclined to think that he has a Mortgage and Note still and that is what you would need to purchase.  I am inclined to think that all the other talk is the Seller trying to entice the OP to purchase said asset (Mortgage & Note) by saying it is "almost done" or "I got a foreclosure order, I just didn't auction the property".  Or alike.  These are NOT actions that a Plaintiff (Mortgagee) can generally cause to take place or not to take place.

The property being auctioned is not at the will, leisure or whim of the Plaintiff (Mortgagee) to decide when the court's order can and will be carried out.  That is beyond the power of the Plaintiff.  

In addition, Summary Judgments are not assignable unless they explicitly say so in the judgement by the court.  This helps preserve the court record for the Plaintiff and Defendant for the case.  Once a decision on the case is made, the case is closed pending the auction.  A substitution of Plaintiff is generally not allowed or as stated above only is specifically allowed in the Judgement or by an alternate court order.  

Further support to this idea that the Seller is the root cause of the terminology issue.  There is no "hassle" burden onto the Plaintiff (Mortgagee) in such a setting.  The workload would have been to actually bring the complaint forward and move through the foreclosure process.  Talking about a workload and referencing the workload to be burdensome post issuance of a SJ is showing up after all the work is actually done.   

If such a situation were true, where the Mortgagee caused a stay of the foreclosure sale, I would be inclined, since that is a very specific thing, to think the Seller (Mortgagee) would specifically have mentioned this detail.  Something to the tune of "I postpone the sale for X reason".  The specifics would be forth coming as that is the sole reason for filing a separate action to ask the court to postpone the sale.  A detail missing from the Seller narrative.

So, in summary of my thoughts.  The terms being used here, I do not believe are correct.  The Seller has no Judgement to assign.  The Seller thought about filing for a foreclosure 8 years ago but "THAT" hassle (the entire foreclosure process) seemed too burdensome and thus was not initiated at all.  NO progress is made in the foreclosure  and thus the whole thing is really moot.  

A fully foreclosure action is likely required. 

Elio, it would help me to understand:

1.  Who is occupying the Subject Property - Mortgagor/Borrower - alleged person who was foreclosed or a New Tenant or is the property Vacant?

2.  When was the last time a payment was made on the Mortgage Account? (Month/Year)

3.  When is the scheduled Maturity Date of the Note? (Month/Year)

ALL the other alternatives to foreclosure need to be put on explicit hold right now.  NONE are viable options until you understand what the status of this actually is.  Trying to do a DIL is a bad idea without clarity.  I have a feeling we have some mangled interests in the property that need to be resolved before dealing with any of that, which can be done at the same time once and if the DIL is viable.  

I will look for some answers to the above from OP and post back.

 

Originally posted by @Elio L. :

I have my attorneys looking into this now, but could use some of your collective insight and advice on this one. 

I've negotiated to buy a non performing 1st private mortgage. The lender has already obtained a final judgement 8 years ago, but does not want to go through the hassle of foreclosing on the property in order to get the deed. 

What's the proper procedure here in Florida? I've heard that the final judgement somehow "wipes out" the note. Are we negotiating to purchase the note, or the "final judgement" from the lender. We don't have much time to sort this out. 

It seems that @Dion DePaoli  is saying (in about 10 different ways) that there is no way there was a foreclosure judgment and no foreclosure action 8 years ago.....that the foreclosure sale post judgment is not at the discretion of the lender.

Maybe you could give a few more details. Why don't you have time to sort this out? What is the status of the property taxes? Where is the borrower?