When unexpected financial difficulties arise, New York homeowners often struggle to keep up with a major expense in their lives – their mortgage payment. Many options are available to aid homeowners in making their payments or, if this option is no longer feasible, appropriately disposing of their property in a manner that recoups as much of the outstanding loan balance for lenders as possible. Loan modifications, refinancing, short sales, deed in lieu, and foreclosure are all viable options for homeowners, but foreclosures are generally the least favorable due to their impact on the borrower’s credit. They also are the most complex course of action, and we explore them further below.
Property Affected by Traditional Pre-Foreclosure and Foreclosures New York uses judicial foreclosure for real property such as a traditional family home or condominium. Co-op apartments are actually personal property, as the mortgagee owns a share in the company that owns the property and leases it back to them – meaning they operate under different foreclosure procedures and timelines. Judicial foreclosure requires a lender to file suit against the defaulting homeowner to enforce its lien against their house.
New York Pre-Foreclosure Steps
Prior to filing a formal foreclosure complaint, a loan servicer or mortgage lender must wait until the borrower is 120 days late on payments to allow them time to seek a loan modification, refinancing, or other avenues to cure their default. New York also requires all residential mortgage lenders to provide 90 days notice before foreclosing on an owner-occupied home. The notice must provide information on how homeowners can cure their defaulted loan and list of government-approved counseling agencies that can assist them.
Depending on the mortgage terms, a lender may be obligated to send a breach letter letting the homeowner know their loan is in default and indicating the lender’s intent to accelerate the entire amount due if the homeowner does not cure the default. Notice usually includes:
- A statement the homeowner is in default;
- Methods to cure the default;
- An allowance of at least 30 days to cure the default; and
- Notice that failure to cure may end in foreclosure proceedings.
Though no uniform rules exist for delivery method or notice contents, mortgages requiring a notice of breach will usually set out what must be included in the notice and the method of delivery required.
New York Foreclosure Steps
After the required 90-day New York notice period, a lender may file suit in court to try and foreclose on a homeowner’s property. The homeowner has a prescribed time frame to respond to the complaint and raise any applicable defenses to foreclosure. Failure to answer results in a default judgment. If the homeowner answers, a sequence of actions may commence, including:
- A Certificate of Merit or “Attorney Affirmation” from the lender’s attorney stating they have reviewed the necessary documents and that plaintiff if the creditor who may enforce its rights.
- An Affidavit of Service which may be required from the lender’s attorney.
- A Mandatory Settlement Conference held within 60 days of the affidavit of service’s filing.
- Formal Discovery in litigation if settlement cannot be reached.
- Filing a Motion for Summary Judgment or Default Judgment to try and prevail without going to trial.
- A trial following an unsuccessful (or no) Summary Judgment Motion.
- A Motion for Final Judgment of Foreclosure and Sale following a court judgment asking for a judgment authorizing a court-appointed referee to auction the property.
- Reinstatement of the loan at any time prior to the Judgment of Foreclosure and Sale (JFS), provided the homeowner pays all overdue amounts, late fees, and costs.
- A publication of a sale in a newspaper at least 30 days before it occurs if the homeowner doesn’t cure prior to the entering of a JFS and setting a sale date.
- A foreclosure sale where the property is sold to the highest bidder. Upon paying, the winner owns the property.
- The lender may seek a deficiency judgment against the former homeowner within 90 days of the foreclosure sale if the property sells for less than is owed. The deficiency is the amount the auction sale price or fair market value falls short of the amount owed by the homeowner.
- Eviction proceedings as necessary in the event the homeowner does not voluntarily vacate the premises after a foreclosure sale.
The complex proceedings leading up to and during a foreclosure are best maneuvered by an experienced New York real estate attorney to avoid any costly mistakes regarding one of your most sentimental and valuable assets – your home. If you are dealing with a residential or commercial foreclosure, get in touch with the talented team of New York foreclosure lawyers at MOWK Law today to discuss your legal options further.