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.