Foreclosure in NY Explained

Are you facing foreclosure? If so, like most homeowners who are at risk of losing their homes, you might feel overwhelmed, worried and not familiar with the details of the complex financial and legal transactions relating to your default and mortgage. New York’s foreclosure process is long and complicated, but you can reduce the stress of foreclosure if you know what to expect—and when to seek help.

What is Foreclosure?

All home loans include two contracts: a promissory note and a mortgage. The note, which outlines the terms of the borrowing agreement, is your promise to repay the loan. The mortgage, on the other hand, establishes your home as collateral for the loan.

The foreclosure process begins after a homeowner defaults—which technically occurs after one missed payment—on a home loan. Because New York is a judicial foreclosure state, a mortgage holder must sue a borrower for foreclosure in court. A home is “in foreclosure” from the time a summons and complaint is filed and up to the point when a judgment of foreclosure and sale is issued in favor of your lender.

What Happens after a Missed Payment

If you miss one payment, your mortgage agreement likely allows for a grace period (usually 15 days) in which you can pay the amount due to avoid late fees. If you do not remit payment by the end of the grace period, your lender will contact you to attempt to collect your missed payment plus any late fees that may have accrued. Don’t ignore these calls and letters; this is your chance to attempt to make other arrangements with your lender.

If you cannot pay, or miss multiple payments, your lender must tell you what steps you should take to avoid foreclosure in a Pre-Foreclosure Notice that must sent at least 90 days before commencing foreclosure. This 90-day window gives you the opportunity to try to work with your lender to find an alternative to foreclosure. The notice must tell you how much you must pay to bring the loan current. It must also give you the names and telephone numbers of at least five government approved not-for-profit housing counseling agencies serving the region where you reside. The loan servicer will then send a “demand” or “Acceleration” letter pointing out that terms of the mortgage have been violated. You will then be given 30 days to pay the delinquent amount and the late charge. The loan servicer will send a “demand” or “Acceleration” letter pointing out that terms of the mortgage have been violated. You will be given 30 days to pay the delinquent amount and the late charge.

How a Lender Initiates Foreclosure

The foreclosure process officially starts when your lender files a lawsuit with a New York State Supreme Court. To begin proceedings, a mortgage holder must file a Summons and Complaint with the court and serve you with the documents. The lender also files a “Lis Pendens,” a public notice that legal action has been taken regarding your home, and a Certificate of Merit to prove ownership of the mortgage.

You must provide a response after you receive notice of the foreclosure lawsuit. If you would like to contest the foreclosure, you should file what is called an Answer, in which you outline your defenses with the court. If you do not wish to object, you should instead file a Notice of Appearance to be notified of all actions in the proceedings. If you fail to respond, however, the court will rule in the case and may issue a default Judgment of Foreclosure and Sale.

Foreclosure Court Proceedings

Within 60 days of your lender initiating foreclosure, the court will schedule a legally mandated settlement conference at which time you will meet with the lender’s representative to attempt to reach an alternate agreement to avoid foreclosure. If the two parties cannot agree to a settlement at the conference, the case continues in litigation.
At this point, the lawsuit enters the discovery phase, during which you and your lender request pertinent information from each other in order to prepare your respective arguments. Each side must file a motion to ask the court for any action. Your mortgage holder, for example, will likely file a Motion for Summary Judgment, which asks the court to issue a judgment of foreclosure based on the evidence presented so far. If the judge declines this motion, however, the case proceeds to trial.

If, at any point in the process, the judge rules in your lender’s favor, the court will issue a final judgment of foreclosure and order the auction of your home to raise funds to repay the loan. Foreclosure sales in New York are by public auction, usually at a county courthouse. The home is sold to the highest bidder and anyone, including the lender, may bid. Once payment is made and the sale is complete the winning bidder takes ownership of the property. You can stop the foreclosure or sale of your home by paying the total amount due to your lender. This is known as your right of redemption. Your right of redemption however must be exercised before your home is sold to the highest at a public auction. Once your home sold by a public auction, the case is over and you cannot regain ownership of your home.

According to the New York State Unified Court System, the entire foreclosure process takes about 445 days (15 months) from the date of the first missed payment to the sale of the home, although the timeline can be significantly longer, depending on several factors. To ensure that your foreclosure case is closed as quickly as possible, contact an experienced foreclosure attorney who will advocate on your behalf, letting you focus on what’s most important: keeping your home.


Your Rights During the Foreclosure Process

If you are one of the thousands of New York homeowners at risk of foreclosure, it is important to be informed of your rights during the process. While no one wants to experience foreclosure, understanding the laws that protect homeowners will ensure your rights are preserved through the foreclosure process as you work to avoid losing your home.

Your Rights before Foreclosure

There are certain laws and procedures in place to protect you and your home before your lender can initiate foreclosure. If you miss a mortgage payment, your promissory note may allow up to a 15-day grace period before you late fees are assessed, although this is not legally mandated. If you are behind on several payments, though, federal law prohibits your lender from filing for foreclosure until you are at least 120 days late.

Before lenders can file a lawsuit for foreclosure on a home, they must take specific steps to comply with New York state laws that protect homeowners by giving them the opportunity to catch up on payments or make alternate arrangements such as refinancing or filing for bankruptcy. At least 90 days before filing a lawsuit, the lender must provide you with information about how to remedy your mortgage default and a list of free or low-cost government-approved housing counselors. This 90-day window gives you the opportunity to try to work with your lender to find an alternative to foreclosure. The notice must tell you how much you must pay to bring the loan current. It must also give you the names and telephone numbers of at least five government approved not-for-profit housing counseling agencies serving the region where you reside.

Your Rights during the Foreclosure Process

After 90 days have passed, your lender may file with the court to foreclose on your home. According to New York law, the lender must keep you informed of the lawsuit by serving you with a formal Summons and Complaint, along with notice of your legal options and rights and what to expect during the proceedings. The law then guarantees you the right to attempt to make alternative arrangements with your lender. Therefore, within 60 days of your lender initiating foreclosure, the court will schedule a legally mandated settlement conference where you will meet with the lender’s representative to attempt to reach an alternate agreement to avoid foreclosure. If the two parties cannot agree to a settlement at the conference, the case continues in litigation.
At any time before the court issues a judgment of foreclosure and sale, you maintain the right to reinstate your mortgage. If you pay your lender the total amount due plus interest, penalty, and related costs, the foreclosure case will be discontinued. If you cure the default after a judgment of foreclosure but before the sale of your home, the court will issue a stay of the foreclosure proceedings. In New York, there is no right of redemption thus you cannot redeem your home once it has been sold meaning you must pay your lender the total amount that is due and required under New York law in order to retain your rights to your home.

Your Rights after Foreclosure

Once your home has been sold or foreclosed upon at a public auction, you will then become a tenant in your own home. The new owner might offer you a monetary incentive if you agree to move out under specified terms, but you do have the right to stay in your home until the new owner evicts you. New York law requires the owner to provide 10 days’ notice before beginning the eviction process.

If the sale price of your home does not cover your mortgage debt, your lender may seek the difference from you within 90 days of the completion of the sale under certain circumstances. Under New York’s deficiency laws, your lender is only entitled to the debt amount less the court-determined fair market value or actual sale price of the house, whichever is higher.
The best way to safeguard your rights during the entire foreclosure process is to enlist the help of a lawyer. A qualified attorney who is experienced in foreclosure cases will act as your advocate, guiding you through the foreclosure proceedings and alternatives, all while ensuring your rights are protected.