What is a lien and foreclosure?
A link is a notice attached to your property that puts everyone on constructive notice that a creditor has a claim. Generally, a lien is filed and recorded in the public records of the county (for real property) or with the secretary of state (for personal property). Why does a link help a creditor? Well … to sell or refinance the property, the borrower’s lender is going to require clear title to the property as a prerequisite for the loan. Therefore, an existing bond in your home has the negative effect of clouding the title and therefore prevents you from selling your property. To release title to the property, you must liquidate the bond and have an authorization on file with the county’s public records notifying everyone of the debt cancellation. If the link is not canceled, certain link holders may choose to foreclose on the property and recover what they owe.
The 7 most common types of links
Property Tax Link: When a landlord fails to pay taxes on their property, the city or county in which the property is located has the authority to levy a lien on the property and force a sale if the taxes are not paid.
IRS link: The federal government submits a link to the IRS for not paying your taxes. If you have equity in your property, the tax bond can be paid with the proceeds of the sales at closing. If the home sells for less than the bond amount, the taxpayer can request the IRS to cancel the bond to allow the sale to complete. The taxpayer can also request that a federal tax lien be secondary to the lending institution’s bond to allow refinancing or restructuring of a mortgage.
Mechanics link: A mechanic’s lien is a legal lien that guarantees payment for services, labor, and materials related to real estate improvements. State statutes that create mechanical links vary by state. These bylaws establish the criteria and circumstances required to create, file and refine mechanic links. Mechanic links are generally classified as super links, which means that they can be superior to all existing links previously registered against real estate, including a mortgage link intended to be a first priority link.
HOA link: Homeowners living in an agreed community will often have to pay a periodic fee to the HOA to cover community upkeep. For example, the HOA will collect fees to pay for things like landscaping, security, or maintenance of common areas like swimming pools, tennis courts, exercise rooms, and clubhouses. To determine how much each homeowner should pay, the Homeowners Association will usually create a budget and divide the total expenses by the number of homes in the community. The owner must pay his share by default throughout the year. Additionally, the HOA may charge special assessments for one-time expenses if the HOA’s reserve funds are inadequate. For example, an HOA may charge a special appraisal to pay for a new, damaged road or to replace the security gate. If the owner is late in paying their monthly fees or special assessments, the HOA will present a link that will automatically be attached to the owner’s property. The title of this link cloud over the property and can be executed to satisfy the debt.
Bond of judgment: A judgment lien is a type of lien that is created by recording when a lawsuit is won against you and then attached to your property to receive payment for the sale of your property.
Utility link: A lien filed on property by the city or utility service for failure to pay a utility bill, such as water or electricity.
Divorce bond: A lien filed on property as a result of a divorce decree.
Are all links the same?
Not! Links vary in type and priority. Priority is critical to lender, and the benefits of having a first priority lien, like a first lien mortgage on the property, are very important. A lender with a primary lien in the form of a real estate mortgage is entitled to repayment of its debt on the proceeds of a foreclosure sale prior to the repayment of any lesser lien holder. This is very important because a foreclosure extinguishes all interest on the collateral (also known as the home) that is less than that mortgage.
What is the foreclosure process?
The foreclosure process differs from state to state. In Florida (a judicial foreclosure state), the lender files a lawsuit through a complaint with the clerk of courts and sends a summons to the borrower. The lender will include other lesser lien holders in the lawsuit to exclude their lower interests, such as co-borrowers or unknown tenants who may have a rental interest in the home. Once the borrower receives the complaint, they have 20 days to file a response. Otherwise, the lender will request a default judgment. However, if the borrower files an answer, then the lender will file subsequent affidavits to support their position and will rebut any affirmative defense in the borrower’s response. If the lender was unable to obtain a default judgment, a lender will likely file a motion for summary judgment. A motion for summary judgment can end a case if the lender can show that “there is no genuine issue of material fact and that you are entitled to a trial as a matter of law.” Most foreclosure cases end this way simply because the facts are not in dispute and the right to a trial is easily established as a matter of law. If the lender prevails in summary judgment or in judgment if the judge did not grant summary judgment, then the lender receives a final judgment for foreclosure. The ruling sets a foreclosure sale date (typically 60-90 days). It is up to the lender to publish the foreclosure date and time in a newspaper for two consecutive weeks prior to the sale. Proof of that posting is needed to ensure that all other parties have received constructive notice of the sale. At the sale, the property is sold to the highest bidder and the lender receives a credit for his offer up to the amount of the final judgment. The borrower then has 10 days after the sale to object to the court issuing a new certificate of title to the property in the name of the prevailing bidder. Upon registering the new certificate of title by the clerk, the previous owner must vacate the property. If the owner does not vacate the property, the new owner can evict the old owner by filing a motion for possession and sending the sheriff off the property to enforce the court order. The sheriff will post the warrant on the property giving the previous owner 24 hours notice to move out. If the landlord does not move, the bailiff will physically force him to vacate the property.