Buying Through Foreclosure – An Introduction

Buying property through foreclosure can facilitate borrower and prior owner recovery while providing a sustainable and lucrative investment for purchasers. Apart from accurate title analysis and property appraisal, it is imperative to understand the underlying litigation and hurdles it might impose on your successful auction purchase. Below is a primer on the basics of the Florida foreclosure system in the context of Miami purchasing. This article briefly introduces the system’s basics, statutes governing foreclosure, vesting and relation back, civil actions, stages in a lawsuit, the rules of procedure, the mortgage foreclosure action and its elements, affirmative defenses and their pleading requirements, the burdens of proof, motions and motion deadlines, final and non-final orders, motions for rehearing and grounds to vacate foreclosure judgments, and mortgage pools and standing.

Bernhard Law Firm PLLC

 Bernhard Law Firm represents local and international investors in real property transactions and litigation. If you have any questions on investing in and litigating over real estate in Florida, please contact Andrew Bernhard at, 786-871-3349,

The Florida legal system

Understanding the basic structure of the Florida legal system is key to understanding mortgage foreclosures. The Florida legal system is divided into three parts: (1) legislative (senators, representative), (2) executive (governor, police officers, prosecutors), and (3) judicial (courts, clerk of court). The legislative makes the foundation of our laws by enacting statutes, enforced by the executive and interpreted by the judiciary.

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The Florida legislature has enacted 48 volumes of laws (a/k/a Titles) with 1013 separate chapters. (CLICK HERE TO SEE THEM). Each chapter reflects a different area of regulation. The statutes begin with basic government administration (Chapters 1–430 regulate government branches, procedures, officials, tax, planning, transportation, health). In the middle are business regulation rules (Chapters 430–688 regulate labor, trade, investments, alcohol, tobacco, animals, plants, business organizations, insurance, banking, and commerce) and property (Chapters 688–739 regulate property, contracts thereon, estates, and trusts). At the end are basic rights, wrongs, and crimes (Chapters 741–1013 regulate family law, civil rights, torts, crimes, prisons, and education). These are the backbone of our laws.

The judicial interpretations of these legislative statutes and previous judicial decisions create a new body of law called common law (i.e. case law). This case law binds courts through a hierarchy of decreasingly powerful court systems (the least powerful court must adhere to all courts above, while the most powerful court only adheres to its own prior decisions). In the state system, the Florida Supreme Court is most powerful, then the District Courts of Appeal, then the Circuit Courts, with the County Court as least powerful.

When seeking to determine the law on any mortgage foreclosure issue, one must look at the statutes first, then at controlling case law decisions in this region, and then at the individual perspectives of the Circuit Court judge assigned to a case. The separation of these government branches administratively affects the foreclosure process as well. For example, to evict a tenant, a judge (judiciary) must issue an order to a clerk (judicial record holder) to issue an order to a police officer (executive). These administrative hurdles have no clear-cut rules and should be navigated by a professional with experience.

Florida Statutes governing mortgages and real property

The Florida legislature has enacted various laws governing mortgages and mortgage foreclosures. Most of these are grouped together in Chapter 702. Section 702.01 provides that mortgage foreclosures are equity actions, not purely legal actions, meaning that the courts must consider concepts of fairness beyond the strict language in contracts and law. The same statute provides that foreclosures shall be tried without a jury, by a judge. Statutes on general banking (Chapters 655–667) and commercial relations (Chapters 668–688, including the Uniform Commercial Code on negotiable instruments such as notes and mortgages) also directly impact foreclosures.

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Chapter 718 is the Condominium Act and regulates condominiums and their associations. Chapter 720 is the Homeowners’ Association Act and regulates HOAs. The Condominium Act is significantly older and more complex. Although Chapter 720 is similar, HOAs are generally arranged as a grouping of houses among streets rather than a grouping of rooms within a building, creating distinct relationship problems requiring distinct sets of rules. There are also groups known as master associations and clubs. Master associations regulate large groups of HOAs or condo projects, while clubs financially prohibit certain types of residents. Neither master associations nor clubs are specifically regulated in these statutes and thus provide a grey area of law.

Florida Statutes on public records and recording priority also directly impact mortgage foreclosures, including Chapter 695 on record of conveyances of real estate, Chapter 712 on marketable record title to real property, and Chapters 725–727 on assignments, fraudulent transfers, and unenforceable contracts on real property. Note that “recording” is the act of taking a document to the County Clerk for assignment to a unique number in the County’s official public records. The Clerk usually organizes these records by page numbers within sequentially numbered books (e.g. Book Number 237549, at Page 2345), maintained chronologically.

Because the official records are public, recording is a predominant method to put the world on notice that a person holds an interest in something. Many laws provide that failure to properly investigate these official records may waive defenses as to lack of knowledge or notice. Further, since 1885 the Florida legislature has continuously resolved that the priority of real estate encumbrances shall be determined by their date and official recording numbers, under Florida Statute s. 695.11: “An instrument bearing the lower number in the then-current series of numbers shall have priority over any instrument bearing a higher number in the same series.” This concept is generally known as “first in time, first in right.”

Vesting and relation back

These statutes are constantly evolving to accommodate new issues in litigation. Each year in July the legislature enacts a new version. The statute version that binds any particular litigation depends on (i) the recording date and language of an association’s covenants at issue; (ii) the date that a person acquires the real property at issue; (iii) the recording date of the lien at issue; (iv) the filing date of the lawsuit at issue; and (v) the person claiming a right under the law at issue. These factors determine “vesting” (e.g. the new purchaser’s rights vested when it purchased the property). There is generally a constitutional prohibition against retroactive application of new law to old issues, although there are exceptions. The proper application of new law to old issues is called “relating back.” Selection of a vesting date is usually a grey area argued to maximize benefits under a particular version of the law.

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Any civil action

A civil action is a court-based process through which one person can seek redress for a wrong done by another, without complete reliance on police and state prosecutor involvement. Civil actions are generally for torts (non-criminal wrongs), while criminal actions are for crimes. As context, when a crime is committed, a government police officer (executive) arrests a person on accusation of a crime. A government prosecutor (executive) represents the public against the accused in court (judiciary). The judiciary intermediates rules of evidence and criminal procedure created by the legislative and judiciary. A jury from the public decides whether the accused’s acts proven by the prosecutor are prohibited under laws created by the legislative.

In contrast, a civil action has no police arrest or government prosecutor. Instead, a private person files a complaint with the judicial clerk. This complainant (the plaintiff) has the obligation to perform all that is necessary to bring the complaint to resolution. The legislative and judiciary have set a process that a plaintiff and the accused (the defendant) must complete to finish a civil action. This process is set out in the Rules of Civil Procedure. Combined with the Rules of Evidence and the Rules of Judicial Administration, these procedures provide the format that all parties and the court must follow. A judge (judiciary) only becomes involved when somebody alleges that the Rules of Procedure are not being properly followed or the Rules require a judge ruling.

Civil actions have many nuances. A civil action is also referred to as a lawsuit. A lawsuit requests money while an action requests performance of an act. A civil action may also arise in equity or in law. An action at law requests money ($) or is premised on clear breaches of statutes or contracts while an action in equity may request performance of an act or is premised on a judge or jury’s determination of fairness. A civil action also has a fact-finder, which can be a judge or a jury. The fact-finder determines what actually happened in the underlying dispute. The judge (also referred to as the Court) also has the role of determining the applicable law.

Stages of any civil action

Every civil action has three major parts: (1) pleading, (2) discovery, and (3) trial and judgment. Enforcement of a judgment is a fourth component generally considered as after a civil action. It is always the burden of the plaintiff to prove its case. If it cannot prove its case, the plaintiff automatically loses.

By painted by John Morgan, uploaded to Wikipedia (en) by Swampyank – The Jury by John Morgan.jpg in Wikipedia (English), Public Domain,

In the pleading stage, the plaintiff files a complaint alleging certain wrongs and attaching necessary documents. The plaintiff hires a process server to hand-deliver these documents to the accused parties (the defendants). Proof of proper delivery of these documents on non-exempt defendants brings the case within the power and control of the judicial system. This power and control is known as “jurisdiction.” The defendant is required to respond or automatically lose the civil action. Failure to respond is known as “default” and automatic loss is known as “default judgment.”

In responding to a complaint, a defendant has several options, including filing: (1) a motion to dismiss challenging the propriety of the Court’s jurisdiction or the form of the complaint; (2) an answer admitting or denying the factual allegations of the complaint; (3) affirmative defenses raising new factual issues that exempt the defendant from the plaintiff’s claims; (4) a counterclaim suing the plaintiff; (5) a crossclaim suing any other defendant; or (6) a third-party complaint suing somebody not named in the lawsuit but related to the issues raised. The plaintiff may then file a reply generally responding to the defendant’s answer or a motion to strike improper parts of the answer as legally unsustainable, redundant, inflammatory, or scandalous. A court must generally rule on all pleading issues raised. If the case can move forward, it will do so when the “pleadings are closed,” meaning there is an acceptable complaint, answer, and reply.

In the discovery stage, the parties make requests to investigate the facts supporting or debunking the pleadings. This process is known as “discovery.” The four major tools of discovery are requests for: (1) admissions; (2) interrogatories (written Q&A under oath); (3) inspection of things and production of records; and (4) depositions (in-person oral Q&A under oath). All parties must have a fair opportunity to take and complete these investigation requests before the discovery phase can end.

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After completion of discovery, the plaintiff will seek judgment through a trial or a motion. If the investigation shows that the plaintiffs and defendants agree on the facts and events but disagree on the application of law to those facts, then they can request the judge to summarily determine who wins by the judge’s interpretation of the law and facts. This is called “summary judgment.” However, if there remain questions as to what actually happened, then the case must go to trial where witnesses testify on the events. After trial, the fact-finder makes a final determination of the true facts, the law, and the application of law to those facts.

The Florida Rules of Civil Procedure

The Florida Rules of Civil Procedure designate the procedures and deadlines that parties must follow in any civil action. (CLICK HERE TO SEE THE RULES). The Rules are numbered 1.010–1.830, with a set of approved forms at Rule 1.900. Rules 1.010–1.270 regulate the first stage (pleadings), Rules 1.280–1.410 regulate the second stage (discovery), Rules 1.420–1.510 regulate the third stage (trial and judgment), Rules 1.525–1.580 regulate post-judgment events (relief from or enforcement of judgment), and Rules 1.590–1.830 regulate miscellaneous items (extraordinary remedies, mediation, arbitration).

The mortgage foreclosure action

Foreclosures in Miami are litigating in the 11th Judicial Circuit Court. The Third District Court of Appeals (3d DCA) and Florida Supreme Court decisions bind these courts in their acts, but the other DCAs’ decisions (1st DCA, 2d DCA, 4th DCA, and 5th DCA) generally guide these foreclosures. A foreclosure is a civil action in which a plaintiff requests remedy for unpaid debt secured by a lien on property. The mortgage lien connects the debt to the collateral, providing that failure to pay the debt allows the lender to take or sell the collateral instead. The debt and collateral can be anything. In a mortgage foreclosure action, the lender sues the borrower, alleging that the lender: issued a loan as reflected in a debt note (a negotiable instrument stating the amount of the loan) and secured the note with a home mortgage (the lien on the home collateral), but that the borrower failed to pay under the contractual terms of the note and mortgage. The lender asks the judge to confirm this to be true and to facilitate public auction of the collateral through a government regulated sale.

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Elements to prove a mortgage foreclosure action

The Florida Supreme Court has approved a form setting these elements for mortgage foreclosure: (1) jurisdiction; (2) the existence and execution of a note and mortgage; (3) the legal description of the property; (4) the present owner and holder of the note and mortgage; (5) the names of parties whose interest in and possession of the property will be foreclosed; (6) monies owed on the debt; (7) default on payment; and (8) acceleration. See Fla. R. Civ. P. Form 1944 and Fla. Stat. s. 702.015. A plaintiff must prove all of these elements to succeed in a mortgage foreclosure.

Affirmative defenses and their pleading requirements

It is important to distinguish “defenses” from “affirmative defenses.” A defense is a denial of any particular allegation in a complaint (e.g. I deny defaulting on my loan). Defenses track the allegations of the complaint (e.g. 1. Deny; 2. Deny . . . ). Conversely, affirmative defenses raise new legal and factual issues relieving a defendant from liability in a lawsuit (e.g. “I moved to Venezuela and sent lender a check for $1 million, I’m waiting for my change”). A defendant must set out affirmative defenses in a section separate from the defenses, and provide sufficient information on underlying facts and law to allow the plaintiff to fully investigate them. If a defendant fails to plead sufficient information in each affirmative defense, the plaintiff can request the judge to strike or waive them.

Conditions precedent and heightened pleading requirements on their defenses

Conditions precedent are events that must occur before something else can happen. Some notiFlorida Statutes or contracts require a person to provide notice, attend mediation or arbitration, or perform some other act before filing a lawsuit. In mortgage foreclosures, a plaintiff must generally send a notice of default on payments, provide the borrower with time to cure the default, and accelerate the entire mortgaged debt—all before filing a lawsuit to collect on the entire mortgaged debt. These are conditions precedent to a mortgage foreclosure filing.

By Ken Lund from Reno, NV, USA – Cropped from the original, Pershing County Courthouse Jury Box, CC BY-SA 2.0,

When filing a complaint for mortgage foreclosure, the lender need only generally allege performance of conditions precedent (e.g. “Lender has performed all conditions precedent to this action.”). However, in raising an affirmative defense of failure to perform conditions precedent, a defendant must plead with specificity and particularity (e.g. “Lender failed to send notice of default within 30 days of filing this suit, as required under section X of the mortgage, which is a condition precedent to filing this action.”). If a defendant fails to sufficiently plead this affirmative defense, the plaintiff can request that the judge strike or waive it.

Burden of proof in a civil action

Generally, a plaintiff must prove its claims and a defendant must prove its affirmative defenses. This is known as the “burden of proof.” It means that to a certain degree, a party must show enough evidence of its claims so as to be entitled to judgment in its favor. The degree required depends on the type of claim and the stage of the lawsuit. In a civil action, the burden of proof is usually by “a preponderance of the evidence,” meaning more likely than not (i.e. 51% or more). In a criminal action, the burden of proof is “beyond a reasonable doubt,” meaning 90–100% likely. In some civil actions, an intermediate burden of proof is imposed, called “by clear and convincing evidence,” meaning that evidence must be found to be credible, facts to which witnesses testify must be distinctly remembered, and testimony must be precise and explicit and witnesses must be lacking in confusion as to facts in issue. The fact-finder must have a firm belief or conviction, without hesitancy, that the events occurred as claimed (i.e. 70–80%). This intermediate burden is imposed when particularly important individual interests or rights are at stake in a civil action. In mortgage foreclosure, the burden is usually by a preponderance of the evidence (more likely than not, 51%). This is not a particularly high standard. However, because foreclosure actions are judged in equity (in fairness, not just law), the judge may modify the result of a foreclosure by notions of fairness.

Motions and motion deadlines

Motions are the parties’ tools to request activity and decisions from the judge. There is almost no limit to the kinds of motions that a party may file. However, there is a limit on the types of motions authorized for adjudication and expressly designated as within the judge’s jurisdiction under the Rules of Civil Procedure. The most common types of authorized motions are: (i) motions for enlargement of time under Rule 1.090(b); (ii) motions to dismiss for failure to comply with pleading rules or failure to properly state a claim under Rules 1.110 and 1.140; (iii) motions to dismiss for failure to attach documents under Rule 1.130; (iv) motions to strike improper pleadings under Rules 1.140 and 1.150; (v) motions for leave to amend pleadings under Rule 1.190; (vi) motions to compel discovery and to sanction for discovery non-compliance under Rule 1.380; (vii) motions to dismiss actions for failure to comply with court rules or to timely prosecute under Rule 1.420; (viii) motions for directed verdict under Rule 1.480; (ix) motions for defaults and default final judgments under Rule 1.500; (x) motions for summary judgment under Rule 1.510; (xi) motions for attorney’s fees and costs under Rule 1.525; (xii) motions for new trial, rehearing, or amendment to judgments under Rule 1.530; and (xiii) motions for relief from judgments or orders under Rule 1.540. Each motion has a body of case law interpreting its scope and application in myriad circumstances. Most have a designated deadline, such as 30 days after judgment.

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Final orders versus non-final orders

Once a party files a motion, it must request that the judge enter an order on the motion, either by agreement with the opposing party or after a hearing and arguments by all sides. The judge’s orders on these motions are considered “non-final” or “interlocutory” when occurring in the middle of a case or issue, and “final” when no further judicial action is contemplated on that issue. The distinction between a non-final order and a final order is often difficult to discern, and may depend on complex case law or discrete language in the order itself. However, certain motions and certain appeals can only be brought against one or the other (final or non-final order). If the improper motion is brought on an unsuitable order, a judge may automatically deny the motion.

Further, the filing of an unauthorized motion on an unsuitable order may not toll the deadline to appeal, which is usually 30 days after rendition of the order. The court may also lose jurisdiction after entry of a final judgment and the expiration of deadlines for modifying, vacating, or appealing the judgment. By failing to file the proper motion on the proper order, many litigants both lose the motion and miss their opportunity to appeal. In the end, this means that an order may become permanent regardless of mistakes, injustice, or evidence thereafter discovered.

In the context of mortgage foreclosures, many attorneys and judges consider the entry of a “final judgment of foreclosure” as the ”final order,” thereby subject to a motion for rehearing and appeal. Some attorneys and judges consider the foreclosure judgment as “final” only after denial of a pending motion for rehearing or expiration of the 10-day deadline to file a motion for rehearing. Yet, there is also case law indicating that a foreclosure judgment only becomes final after judicial sale and issuance of the certificate of title, as this is the juncture when no further judicial action is contemplated or necessary for foreclosure. See, e.g., Commercial Laundries, Inc. v. Golf Course Towers Assocs., 568 So. 2d 501, 503 (Fla. 3d DCA 1990) (holding confirmation of judicial sale by issuance of certificate of title constitutes final judgment). The judge or parties may also modify the finality of a judgment by adding or removing language in the order (e.g. “the Court retains jurisdiction to . . .” or “this is a final order and no further judicial action is contemplated.”). The takeaway is that this juncture of any lawsuit should be handled by a professional experienced in challenging judgments and appeals.

Motions for rehearing and variations (motion for reconsideration)

Florida Rule of Civil Procedure 1.530 authorizes the filing of a “motion for rehearing” within 10 days after judgment. A motion for rehearing should generally raise new evidence or points of law that the judge did not hear or consider when rendering its initial decision. While an authorized motion for rehearing on a final judgment tolls the time to file an appeal, an unauthorized motion for rehearing on a non-final order does not. Nevertheless, the judge may treat the motion as an unauthorized “motion for reconsideration” that may be heard within the “inherent jurisdiction” of the court. The motion for reconsideration is essentially a backdoor to have a judge re-think its decision even where there is no clear way to challenge the order. These motions can be effective where the judge entered its order in a rush or without sufficient consideration of the facts and law, and the effect of the order would work some injustice. However, these motions carry significant risk as they do not toll the time to appeal and may be denied outright as unauthorized. To hedge this risk, many litigants will title their motions as “motion for rehearing and/or reconsideration,” file them within the 10-day deadline provided in Rule 1.530, and seek an emergency hearing before expiration of the 30-day appellate deadline.

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Grounds to properly vacate a judgment versus to dismiss a case

Motions for a judgment of dismissal usually occur after discovery where a defendant has accumulated sufficient evidence to win. Motions to vacate a judgment occur after entry of a judgment. A motion to vacate a judgment is usually brought under Rules 1.530 or 1.540. When under Rule 1.530, the motion is called a motion for rehearing, but the effect is to vacate the judgment. When under Rule 1.540, the motion is called a motion to vacate or set aside judgment. Rule 1.540 authorizes motions for relief for judgments or any other order based on clerical mistakes, other mistakes, inadvertence, excusable neglect, newly discovered evidence, fraud, voidness, satisfaction, release, or equity. Although the list is long, there is significant case law curtailing the proper arguments to vacate a judgment on any of these grounds. The deadline to file a Rule 1.540 motion is generally within a reasonable time, not more than one year after judgment, unless the judgment is void, satisfied, released, reversed, or prospectively inequitable. For example, a judgment entered where the plaintiff improperly served the complaint on the defendant at the beginning of the case is void, and can be vacated at any time.

Mortgage pools and standing

Mortgage pools are groupings of mortgage securities combined through complex arrangements between mortgage brokers, issuers, lenders, servicers, holders, owners, and custodians. Briefly and generally, mortgages once originated from private brokers who mediated issuance from a large bank to a private borrower. Fraud in the mortgage brokerage sector was a leading cause of the 2007 financial collapse. Issuing banks and brokers would then group a large number of these loans into a pool (e.g. 1,500 mortgages). Based on an analysis of their value and likelihood of profit or default, the pooler would categorize them into separate tranches (e.g. Grade A, Grade B, Grade C, Grade D). After tranching, the pooler would sell the pool to a bank at a certain price. That bank became the owner. The owner usually hired another bank to service the loans, which included taking in payments, sending out notices, and foreclosing on defaulting borrowers. The owner would sometimes hire a custodian to physically hold the original mortgages and notes. The owner could then issue certificates (like stocks) in the pool for sale on the open or private investment market. Buyers would purchase these certificates based on their perception of the likelihood of profit or default in the pool. Many of these pooling arrangements were backed or insured by federal agencies such as Fannie Mae and Freddie Mac, who obtained ultimate ownership title to the pools.



Issues with the pools arose for several reasons, including: (1) the initial brokers improperly issued the loans to borrowers, providing money to borrowers without sufficient income and on fictitious collateral (home) appraisals; (2) the brokers or banks that analyzed, qualified, and tranched the pools did so fraudulently, misrepresenting the pools’ productivity or toxicity; (3) the original signed note documents never physically transferred to the new pool owners; and (4) many loans were sold to banks. These issues are decisive in mortgage foreclosure because the foreclosing plaintiff must prove that it owned and held the original note, endorsed or made payable to the plaintiff, on the day the plaintiff first filed the foreclosure (there are some exceptions). This is called “standing” to foreclose. Given that many of these documents are lost or sold to multiple parties, or improperly endorsed or assigned, plaintiffs often filed foreclosures without standing. If a defendant can show lack of standing, the judge must dismiss the foreclosure action.

We hope this information helps prime you on foreclosure investing. Bernhard Law Firm represents local and international investors in real property transactions and litigations. If you have any questions on investing in and litigating over real estate in Florida, please contact Andrew Bernhard at, 786-871-3349,

Bernhard Law Firm PLLC
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