FL Underwriting References

Acknowledgments

FS 695.01 requires a deed or mortgage be recorded to be effectual against third parties; and FS 695.03 requires a deed, mortgage, or other document to be acknowledged to be recorded. Those statutory sections provide as follows: "[n]o conveyance, transfer, or mortgage of real property . . . shall be good and effectual in law . . . against creditors or subsequent purchasers . . . unless the same shall be recorded according to law." Fla.Stat. 695.01. "To entitle any instrument concerning real property to be recorded, the execution must be acknowledged by the party executing it [and] authenticated by a . . . notary public who affixes her or his official seal." Fla.Stat. 695.03. A jurat is not an acknowledgment so a deed or mortgage is not legally recorded if it only contains a jurat but does not have an acknowledgment. Therefore, if a recorded deed or mortgage only contains a jurat it will not provide constructive notice to third parties.

After Acquired Title Doctrine

The after acquired title doctrine is also known as estoppel by deed. Under that doctrine, if a person executes a deed or a mortgage before that signor actually has title, as long as that signor warrants the title in the deed or mortgage that they execute, when the signor acquires good title, that good title flows on through to their grantee or mortgagee.

Associations

Association Foreclosures

• See Foreclosures

Association Liens

Under FS 718.116 and 720.3085, Associations have a lien on each unit/parcel and the lien has priority as of the recording date of the condo dec or community CCR's. However, as to first mortgagees of record, the Association's lien [condo and non-condo] only has priority from the date that the lien was recorded. So, an Association cannot foreclose out a first mortgage unless the Association's lien was recorded prior to the first mortgage. Associations can foreclose out junior mortgages regardless of when the junior mortgage was recorded.

• After a first mortgagee obtains title through foreclosure or a deed in lieu, it has liability for unpaid assessments that came due prior to acquiring title limited to the lesser of: (1) the unit/parcel's unpaid common expenses and regular periodic assessments [non-condo statute adds "special assessments"] that came due 12 months prior to acquisition of title; or (2) one percent of the original mortgage debt.
• Duration
  • Non-Condo HOA - 5 years from recording
  • Condominium - 1 year from recording

Refinances Residential Property

• Association Estoppel is not required
• Municipal lien search is not required
• An Indemnity from the owner/borrower in favor of WFG regarding the forgoing is required

Bankruptcy

Chapter 13

Sale Of Property

When a person files bankruptcy all of their property becomes part of the bankruptcy estate even homestead. So, the debtor cannon sell or mortgage the property because they do not have title. Title has to be returned to them in the bankruptcy. One way for the debtor to get title back from the bankruptcy estate in a Chapter 13 is when the Chapter 13 Plan is filed and it provides that the debtor will keep the subject property or at least does not say that it will be sold or surrendered to a lender; and the court enters an Order Confirming the Plan. After the plan is confirmed, title goes back in to the debtor.

• Requirements to insure based on a Chapter 13 Plan:
  • Record a certified copy of the Chapter 13 Plan
  • Record a certified copy of the Order Approving the Plan
  • Record a certified copy of the pertinent pages from the bankruptcy docket showing that there was no appeal of the Order Approving the Plan.

Constructive Abandonment

When a person files bankruptcy all of their property becomes part of the bankruptcy estate even homestead so the debtor cannot sell or mortgage the property because they do not have title. Title has to be returned to them in the bankruptcy. When the bankruptcy is closed and the property is listed on Schedule A and the Bankruptcy Trustee does not sell the property, title vests back in to the debtor when the bankruptcy is closed i.e. terminated. This is known as constructive abandonment.

• Requirements to insure based on constructive abandonment:
  • Record a certified copy of Schedule A showing that the subject property was listed.
  • Record a certified copy of the bankruptcy docket showing that the bankruptcy case is closed.

Homestead - Judgments

Filing bankruptcy only removes the personal debt but does not remove a judgment lien from property without a further Order from the bankruptcy court. However, when property is claimed as homestead, the agent may be able to insure over the judgment(s) using WFG's Affidavit of Homestead procedure. Contact Underwriting for the Conditions For Use and the Affidavit of Homestead.

Homestead - Sale Of

When a person files bankruptcy all of their property becomes part of the bankruptcy estate even homestead. After filing bankruptcy, the debtor cannont sell or mortgage the property because the debtor does not have title. Title has to be returned to the debtor in the bankruptcy. One way of returning title to homestead to the debtor within the bankruptcy is to list the property as Exempt on Schedule C of the bankruptcy. Then the creditors and the Trustee have 30 days after the meeting of creditors to object to any exemptions on Schedule C. If they do not object in that 30-day period, title goes back to the debtor so he/she can sell or mortgage the homestead/property.

• Requirements To Sell Homestead Property When Owner Files Bankruptcy:
  • Record a certified copy of Schedule C to show that the property was listed as Exempt in the bankruptcy
  • Record a certified copy of the Docket to show that neither the Trustee nor any creditors objected to the claim on Schedule C that the property is exempt from the bankruptcy estate.

Judgments - Property Acquired After Bankruptcy

As long as the debt/judgment is listed on Schedule F in the bankruptcy and the debtor obtains a discharge in the bankruptcy, the judgment would not attach to property acquired after the discharge was entered.

• Requirements to insure over the judgment(s):
  • Record certified copy of Schedule F showing the debt/judgment.
  • Record certified copy of the discharge.
  • Record certified copy of the first page of the bankruptcy docket showing that the bankruptcy is closed.

Notice Of Intent To Sell By Trustee

For non-homestead, the bankruptcy trustee can file a Notice of Intent to Sell with negative notice. What that means is, if nobody (creditors or the debtor) file an objection to the sale within the 21-day period from the date that Notice of Intent to Sell was mailed, the Trustee can sell the property without a court order. If the debtor or a creditor object to the Notice of Intent to Sell, then a hearing and a bankruptcy court order would be required.

• Requirements to insure a sale by the Trustee:
  • Wait for the 21-day period to expire.
  • Review the current docket to confirm that no objections to the Notice of Sale were filed
  • Record certified copies of the following:
    • 1. Notice of Intent to Sell
    • 2. Docket evidencing no Objections to the Notice of Intent to Sell were filed during the 21-day period
  • If an objection to the Notice of Intent to Sell is filed, record certified copies of the following:
    • 1. Notice of Intent to Sell
    • 2. Order Denying the objection and authorizing sale'
    • 3. Bankruptcy Docket

Stripping Liens

• See Main Menu
  • National & Multi-State Topics
    • Bankruptcy
      • Stripping Liens

Foreclosures

Association Foreclosures and Small Lien Foreclosures

In Association foreclosures and small lien foreclosures, WFG requires personal service of process on the former owners instead of constructive service i.e. publication, as a risk analysis proposition. While constructive service is a legal way to serve a person, WFG will not rely it in small lien foreclosures including Association foreclosures because we need o be sure that the owner knew he/she was going to lose their property for that small lien amount.

Competing Foreclosures

If mortgage being foreclosed is a first mortgage and if the Association is brought in to the mortgage foreclosure, the Association can be wiped even when it obtains a Certificate of Title in the Association foreclosure subject to the lender having to pay the lender’s safe harbor amount of Association fees to the Association. However, when a 3d party purchases title at the Association’s foreclosure sale and obtains a Certificate of Title, while that 3d party’s title is also wiped out by the mortgage foreclosure, WFG is concerned that the 3d party may not realize that the title obtained in the Association foreclosure was eliminated in the mortgage foreclosure and may not voluntarily vacate the property. Therefore, even though the 3d party’s title is eliminated, WFG does not want to have to pay, on behalf of its insured owner, to eject the 3d party. Therefore, we usually require a deed from that 3d party purchaser. However, in lieu of a deed, WFG will accept an affidavit from the seller or seller’s representative that the property is vacant i.e. that the 3d party is not in possession of the property.

Homestead Devise

Deed from Entireties ownership into Tenancy in Common in the H&W may constitute waiver of homestead such that subsequent conveyance of the 1/2 interest by will does not violate homestead devise restrictions. Stone v. Stone (4th DCA 2014)

Probate

Definitions

Testate means that the decedent had a Will. Intestate means that the decedent did not have a Will. Devise is a gift in a Will, and the beneficiaries in the Will are known as “Devisees”. F.S. 731.201(10) and (11). Heirs. When the decedent does not have a Will, relatives of the decedent who inherit property according to Florida’s intestate laws are called “Heirs”. Devisees are Beneficiaries under a Will; and Heirs are Beneficiaries when the decedent does not have a Will. F.S. 731.201(20).

Beneficiary applies to both Devisees under a Will and to Heirs under Florida’s intestacy laws.  F.S. 731.201(2).

General Principals

Title Passes On Death

The decedent’s death is the event that passes title to the beneficiaries. F.S. 732.101(2), 732.514, and Title Standards 5.1 and 5.2. Based upon those statutory sections and the Title Standards, title passes automatically at the moment of death to the beneficiaries named in the Will, or to the heirs if there is no Will. Heirs are determined according to Florida’s intestate laws. See F.S.732.102 and 732.103 for Florida’s intestate succession.

Why Is Probate Required?

If title passes upon death, why is a probate necessary? Florida Statute Section 733.103(1) provides that: “[u]ntil admitted to probate in this state … the will shall be ineffective to prove title to, or the right to possession of, property of the testator.” Therefore, even though title passes immediately to the beneficiaries upon death, those beneficiaries will not be legally recognized until a probate has been filed.

Authority of Personal Representative

With respect to a personal representative’s authority to convey title, F.S. 733.608 provides that: “All real and personal property of the decedent, except the protected homestead … shall be assets in the hands of the personal representative”; and F.S. 733.607 provides that: “… every personal representative has a right to, and shall take possession or control of, the decedent’s property, except protected homestead”. Based upon these statutory sections, a personal representative can only convey title to non-homestead property or unprotected homestead. Only when the property is clearly not the homestead of the decedent can the personal representative convey the property. An example would be vacant land, or when there is a court order determining other property to be the homestead of the decedent. Even though a personal representative has no authority over homestead property, we always require a deed from the personal representative to eliminate the interest of the estate.

However, if there is an Order determining the property to be the homestead of the decedent, a deed from the personal representative would not be necessary because the personal representative has no authority over homestead property and the court has determined the property to be homestead. When we do not have solid proof that the property was the homestead of the decedent, we require a deed from the personal representative to eliminate the estate’s interest just in case the property was not the homestead of the decedent.

Court Order. If there is a court Order authorizing the personal representative to convey the homestead property, is a deed from the personal representative sufficient to convey good title without obtaining deeds from the beneficiaries? The answer is “no” because a personal representative has no authority over homestead property even with a court order.

Restrictions on Devises of Homestead:

• Homestead Law.

Regarding a devise of homestead property, Article X, Section 4(c) of the Florida Constitution and F.S. 732.4015(1), provide that: “the homestead shall not be subject to devise if the owner is survived by a spouse or minor child, except the homestead may be devised to the owner's spouse if there is no minor child.” Regarding intestate (no Will) property, F.S. 732.401(1) provides that: “If not devised as authorized by law and the constitution, the homestead shall descend in the same manner as other intestate property; but if the decedent is survived by a spouse and one or more descendants, the surviving spouse shall take a life estate in the homestead, with a vested remainder to the descendants in being at the time of the decedent’s death per stirpes.”

• Restrictions of Devises of Homestead. The foregoing Constitutional Section and Statutory Sections restrict who the homestead property can be devised to (gifted to in a Will) if the decedent is survived by a spouse and/or minor children.

• • 1. Spouse = Spouse Only. If the decedent is survived by a spouse and no minor children, the only person that the homestead property can be devised to is the spouse. A devise [a gift in the Will] of the homestead property to anybody other than the spouse will fail, and the homestead will be inherited as intestate property as if there had been no Will i.e. the spouse will receive a life estate and the decedent’s descendants in being at the time of the decedent’s death, if any, will receive the remainder. If there is only a surviving spouse and no descendants, then the spouse inherits the entire fee in the homestead, not just a life estate.

• • 2. Minor = Nobody. If the decedent is survived by a minor child, the homestead property cannot be devised to anybody. In this situation, any devise (gift in the Will) of the homestead will fail and the minor child (or children) will receive title to the homestead property under Florida’s intestate laws as if there had been no Will. F.S. 732.401(1) and 732.103. If the decedent is also survived by a spouse and the minor child or children, the spouse will inherit a life estate and all of the children [minors too] will inherit the remainder.

• Questions To Ask. Based upon the foregoing law, the following questions should always be asked in order to determine who has title to the property; and who deeds are needed from:
  • 1. Was the property the homestead of the decedent?
  • 2. Was the decedent survived by a spouse?
  • 3. Was the decedent survived by any minor children?
  • 4. Did the decedent have a Will?
  • 5. To whom did the Will devise the homestead to?
  • 6. Has the decedent’s estate been probated in Florida?

Examples of How Probate Law is Applied to Homestead:

*Example One.  Title is vested solely in the decedent and he was survived by a spouse and adult children:   

• • 1. The decedent’s Will devised the homestead to his spouse. That devise would be valid because the only person that he is allowed to devise the homestead to, in this situation, is his spouse. F.S. 732.4015(1).

• • 2. The decedent’s Will devised the homestead to the adult children. Under F.S. 732.4015(1) and 732.401(1), the only person that the decedent can devise the homestead property to is his spouse. Since his Will devised the homestead to somebody other than his spouse, that devise would fail and the homestead would pass as if there was no Will i.e. as intestate property, pursuant to F.S. 732.401(1). Under that section, the surviving spouse would inherit a life estate and the adult children would receive a remainder interest. Pursuant to F.S. 732.401(2), in lieu of the life estate, the surviving spouse may elect to take an undivided one-half interest in the homestead as a tenant in common with the children, who would inherit the other one-half interest.

• Example Two. The decedent, who was the sole titleholder, was survived by a spouse and minor children. His Will devised the homestead to his spouse. In this situation, the homestead cannot be validly devised to anyone because the decedent was survived by minor children. Therefore, the homestead will be inherited according to F.S. 732.401(1) as if there was no Will. Under that statue, the surviving spouse will receive a life estate and the decedent’s descendants [the children] will receive the remainder interest. Pursuant to F.S. 732.401(2), in lieu of the life estate, the surviving spouse may elect to take an un-divided one-half interest in the homestead as a tenant in common with the children, who would inherit the other one-half interest.

• Example Three. The decedent was survived by two adult children and two minor children. The decedent’s Will devised one-half of the homestead to the adult children and one-half of the homestead to the adult children, as trustees for the minor children. That devise would fail because under Art. X, Section 4(c) of the Florida Constitution, F.S. 732.4015(1), and 732.401(1), when the decedent is survived by a minor(s), the homestead cannot be devised to anyone. Therefore, the homestead would be inherited according to Florida’s intestate laws, F.S. 732.4015(1), 732.401(1), and 732.103 as if there had been no Will. Florida Statute 732.103 provides that: “The part of the intestate estate not passing to the surviving spouse under s. 732.102, or the entire intestate estate if there is no surviving spouse, descends as follows: (1) To the lineal descendants of the decedent.” Since all of the children, adults and minors, are the lineal descendants of the decedent, they would “inherit” the homestead under the forgoing statutes.

• Example Four. The decedent was survived by minor children only and his Will devised the homestead to those minor children. Oddly, that devise would fail because under Art. X, Section 4(c) of the Florida Constitution, F.S. 732.4015(1), 732.401(1), and 732.103, when the decedent is survived by a minor child or minor children, the homestead cannot be devised to anyone. Therefore, the homestead would be inherited according to Florida’s intestate laws as if there had been no Will. Since the minor children are the lineal descendants of the decedent, they would “inherit” the homestead under forgoing laws. So, even though the devise of the homestead to the minor children in the Will fails, the minor children would still inherit the homestead property.

• Example Five. The decedent is survived by adult children only and his Will devised the homestead to those adult children. That devise would be valid and the adult children would receive the homestead as devisees under the Will. The reason that this devise is valid is because the decedent was not survived by a spouse or minor children, so he could devise the homestead to whomever he desires.

• Example Six. Assume the same facts as Example No. E except that the decedent devised the homestead to one child instead of all of his adult children. Since the decedent was not survived by a spouse or a minor child, he may devise the homestead to whomever he desires, even somebody other than his children, so the devise to one child would be valid.

Reforeclosure

Al LaSorte Reforeclosure - the Good, the Bad and the Ugly

After a year and a half dueling with foreclosure defense counsel, you finally have a foreclosure judgment in hand and a sale date scheduled when you learn of a subordinate lienor whose lien pre-dates the foreclosure suit, but which you didn’t name as a defendant because the pre-suit title search failed to uncover it.

Just for a moment, panic sets in. The client is counting on getting title at the upcoming clerk’s sale and won’t be happy. What to do?

Never fear, all is not lost. There is a remedy (albeit, one with a catch) – reforeclosure.

Where a subordinate lienholder is omitted in a foreclosure action, its lien is not extinguished, unlike the lien of any lienor properly named and served. But that doesn’t necessarily give the omitted lienor a windfall. The lien can still be foreclosed out, even after the clerk’s sale has occurred. While the successful high bidder at the sale takes its title subject to the omitted lien, it can eliminate the omitted lien via a re-foreclosure suit:

“The remedies of a purchaser at the foreclosure sale against an omitted junior mortgagee are a motion to compel redemption by the junior, or re-foreclosure in a suit de novo. The omitted junior mortgagee may defend in the same manner as if the initial foreclosure had not happened. Abdoney v. York, 903 So. 2d 981, 983 (Fla. 2d DCA 2005).” Marina Funding Group, Inc. v. Peninsula Property Holdings, Inc., 950 So.2d 428 (Fla. 4th DCA 2007).

The reforeclosing plaintiff need not be the lender; if the clerk’s sale has already occurred, the certificate of title holder may reforeclose as well, as the successor to the superior lienholder (mortgagee). White v. Mid-State Savings & Loan Ass’n, 530 So.2d 959 (Fla. 5th DCA 1988).

The re-foreclosure can be accomplished by a motion to compel re-foreclosure, or if the foreclosure action is already closed, by a separate suit. Therein, the complaint names only the omitted lienor as a defendant. It alleges that the lien is inferior to the foreclosed mortgage, that the lienor was inadvertently omitted from the foreclosure action, and that had it been named, this lien would have been eliminated by the foreclosure sale.

Re-foreclosure is a two-step process. The first is to obtain an order giving the lienor a set time (usually thirty days) to redeem the property by paying into the court registry the same amount it could have paid in order to redeem the property and save its lien, had it been named properly in the original foreclosure suit (i.e., the amount owed on the superior mortgage as of the date of the original foreclosure action). This can usually be handled via summary judgment. The order also provides that if the lienor fails to redeem by the deadline, the court will enter judgment removing the lien from the property.

The second step occurs once the lienor fails to redeem the property within the set time period. After the deadline runs, a motion for entry of judgment extinguishing the lien is usually all that is needed. The court enters judgment, the lien is extinguished, and you have a happy client.

Note – reforeclosure is usually a safe procedure for clearing title to property. But here’s the catch: where there is equity in the property above the redemption price, there is risk that the omitted lienor will exercise its redemption right and buy the property out from under the plaintiff. Let’s say you foreclose a $200,000 mortgage on a property worth $400,000, and in doing so you omit a $250,000 second mortgage. Let’s further say a third party buys at the clerk’s sale for $350,000, thinking she got a great deal. If that buyer then discovers the omitted second mortgage, she can file a reforeclosure action to attempt to eliminate it and clear up her title.

But in the ensuing reforeclosure, the lienor will have the opportunity to redeem the property for the same $200,000 it could have redeemed it for in the original foreclosure action.

“The term “right of redemption” takes on different meanings depending on whether it refers to the right of a mortgagor or a subordinate or junior mortgage. When a mortgagor redeems, his property is freed from the redeemed mortgage. “Redemption” in the context of a junior mortgagee or other junior lienor, “it refers to his right to satisfy a prior mortgage by payment of the debt it secures and thereby become equitably subrogated to all rights of the prior mortgagee.” Engels v. Valdesuso, 497 So. 2d 698, 700 n.1 (Fla. 3d DCA 1986).

Since in our hypothetical the property is worth double the amount of the mortgage that got foreclosed, the missed lienor has every incentive to come up with $200,000 and redeem within the thirty day period, thereby being subrogated to the original lender’s $200,000 lien position, per Marina Funding, supra. It then would have the newly-acquired $200,000 first lien, plus its own second lien of $250,000, for a total of $450,000 in liens on a property worth $400,000, using up all the equity in the property. The purchaser at the clerk’s sale would have nothing to show for her $350,000 purchase. Not such a smart deal, after all!

Moral of the story – reforeclosure can be an effective tool for eliminating omitted subordinate liens. But it only makes sense where the mortgage that was foreclosed (and therefore the price for subordinate lienors to exercise their redemption rights) is comfortably less than the value of the property.

Note – the term “reforeclosure” only applies to omitted subordinate lienholders, not to owners of the subject property itself. Where an owner is omitted in a foreclosure complaint, the foreclosure judgment is void. As such, filing a new action to name the correct owner is not a “reforeclosure,” but rather simply a “foreclosure.” English v. Bankers Trust Co. of California, 895 So.2d 1120 (Fla. 4th DCA 2005).