Payments During Foreclosure: Requesting Payment, Show Cause Hearing, Payment Terms, and Eligibility
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Except in cases of an owner-occupied residence, lenders are entitled under Florida law to receive payments during the pendency of a foreclosure proceeding. The rules and procedure for obtaining payments are provided in Section 702.10(2), Florida Statutes. Lenders must pay careful attention to this Florida Statute to ensure they preserve their rights and properly deploy this valuable litigation tool.
Requesting Payments
Section 702.10(2), Florida Statutes, provides in any action for foreclosure, other than owner-occupied residential real estate, in addition to any other relief that the court may award, the plaintiff 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. Should a court elect to enter an order, Section 702.10(2)(a), Florida Statutes provides that:
The order shall:
- Set the date and time for hearing on the order to show cause;
- Direct the time within which service of the order to show cause and the complaint shall be made upon each defendant;
- State that a 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;
- State that, if a 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 is 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; and
- Require the movant to serve a copy of the order to show cause on the defendant in the following manner: (a) If a defendant 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; or (b) If a defendant 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 defendant in the same manner as provided by law for original process.
Show Cause Hearing: If Borrower Does Not Respond
Section 702.10(2)(c), Florida Statutes, provides that if a borrower waives the right to be heard on the order to show cause, then the court may promptly enter an order requiring payment in the amount provided in paragraph (e) or an order to vacate. Section 702.10(2)(b), Florida Statutes, provides that the right of a defendant to be heard at the show cause hearing 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. A 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.
Show Cause Hearing: If Borrower Does Respond
If the court finds that the mortgagor has not waived the right to be heard on the order to show cause, Section 702.10(2)(d), Florida Statutes, provides that 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 plaintiff 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 plaintiff and provide for a remedy as described in paragraph (f). 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 lien being foreclosed, including all principal, interest, unpaid taxes, and insurance premiums paid by the plaintiff.
Payment Terms
The terms of payment are further explained in Section 702.10(2)(e), Florida Statutes, and Section 702.10(2)(g), Florida Statutes. Section 702.10(2)(e), Florida Statutes, provides if the court enters an order requiring the mortgagor to make payments to the plaintiff, 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 under this section.
Section 702.10(2)(g), Florida Statutes, further provides that all amounts paid pursuant to this section shall be credited against the mortgage obligation in accordance with the terms of the loan documents; however, payments made under this section do not constitute a cure of any default or a waiver or any other defense to the mortgage foreclosure action.
Additionally, Section 702.10(2)(f), Florida Statutes, and Section 702.10(2)(h), Florida Statutes, provide the remedies for lenders should the borrower fail to make payments as they become due. Section 702.10(2)(f), Florida Statutes, provides if the court enters an order requiring payments, the order shall also provide that the lender is 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. Courts have held that reference to “some other method of enforcement” of a court’s payment order includes the entry of a foreclosure judgment. We Help Cmty. Dev. Corp. v. Ciras, LLC, 144 So. 3d 578, 581 (Fla. 4th DCA 2014).
Should the mortgagor fail to make payment and the premises remain occupied in violation of a court order to vacate, Section 702.10(2)(h), Florida Statutes, provides that upon the filing of an affidavit with the clerk, that the clerk shall issue to the sheriff a writ for possession.
Qualification
Lenders are not entitled to receive payments during the pendency of a case if the foreclosure is of an “owner-occupied residence”. Section 702.10(2)(i), Florida Statutes, provides the general rule for determining owner-occupied residential property status, and states there is a rebuttable presumption that a residential property is an owner-occupied residential property, if a homestead exemption for taxation was granted according to the certified rolls of the latest assessment by the county property appraiser, before the filing of the foreclosure action. Lenders must ensure they are eligible to receive payments during the pendency of a case by determining if the borrower was granted a homestead exemption.
Conclusion
Section 702.10(2), Florida Statutes, provides a valuable tool for lenders to utilize during the pendency of a foreclosure proceeding. The ability for lenders to require a borrower to make payments during the pendency of the foreclosure proceeding can be leveraged during negotiations to provide more favorable settlement terms for the lender in a consent judgment foreclosure. Additionally, after the court enters an order directing the borrower to make payments, the lender will be able to take immediate possession of the property should the borrower miss payments, and the lender could potentially receive an entry of a foreclosure judgment.
Lenders requesting payments must follow the requirements of Section 702.10(2), Florida Statutes, to ensure they are eligible to receive payments during the pendency of a case. From requesting an order to identifying the payment terms, Section 702.10(2), Florida Statutes, contains several nuances which must be adhered to in order to obtain future payments on a note after initiating a foreclosure. Additionally, lenders must consider whether the loan secures an “owner occupied” residence, which could potentially prevent lenders from receiving payments during the pendency of a case.
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