Foreclosure: What you can do about it

In 2017, over 12,000 houses were in foreclosure in New York, according to the Furman Center. While this can be a significant decrease in the height of the housing crisis a decade ago, New York State still has among the highest foreclosure rates in the country. And while it proceeds to decline as the market recovers, a foreclosure remains discouraging and scary for homeowners. Unfortunately, statistics do not account for the struggles of people that are still trying to meet mortgage payments and are on the verge of losing their homes as a result. 

What is a foreclosure?

A foreclosure is a lawsuit filed by a mortgage broker or creditor against a debtor. This typically happens after the debtor fails on one or more loan obligations.  In New York, the foreclosure process can take nearly 15 months to be finished from the date of the first miss.  A foreclosure may result in the borrower dropping their residence into your lender or bank via an auction of the house.  

How do foreclosures happen?

To proceed with foreclosure filings, the lender needs to sue the debtor in court to enforce their rights under the mortgage agreement.  However, before the foreclosure procedure legally starts, borrowers must overlook a few successive mortgage obligations. A missed payment can occasionally be brought on by a loss of a job, a decrease in earnings, or massive home/personal expenses, among other factors.  Even though New York state doesn’t require creditors to give notice of payment(s), a few mortgage agreements indicate that a note has to be sent within 30 days from the first missed repayment. Following these payments that are missed, the lender will send an acceleration letter to the debtor stating that the whole outstanding amount of the first loan is expected in the event the arrears (sum delinquent ) isn’t paid by a predetermined date.

If payment is not made within a 3-6 month interval, the bank will then lawfully proceed with a pre-foreclosure notice delivered at least 90 days before court proceedings. This document alerts the borrower to how much is owed to bring the loan current. It must also offer the borrower the contact details of at least five authorized non-profit home counseling agencies that support the area that the borrower resides.  After these papers are registered, the pre-foreclosure procedure is officially underway.

What should I do once I’ve received a pre-foreclosure notice?

Upon receiving a notice of intent to foreclose, borrowers must take immediate action to protect their houses in this grace period. This is the opportunity to work with your lender or loan servicer to discover an alternative to foreclosure. Some choices include:

  1. Contesting the foreclosure.
  2. Paying arrears and bringing the loan current.
  3. Applying for a loan modification.
  4. Refinancing with another lender.

What happens if I don’t do anything after receiving the pre-foreclosure notice?

During the 90 day pre-foreclosure notice period, the financier can file a “lis pendens,” or pending lawsuit, with the court and serve the borrower with a summons and complaint. The borrower has 20 days (if summons and complaint are served personally) or 30 days (if another method is used) to file an answer. This gives the borrower a chance to oppose the foreclosure litigation. The answer must be sent to the lender’s lawyer as well as the court.

The mortgage then files an affidavit of service, with the details of when and how their client was served with a summons and complaint. Also, a request for judicial intervention is demanded to schedule a compulsory foreclosure settlement conference. If the creditor fails to request judicial intervention, the borrower may file one to schedule the settlement conference.

If the mortgagee fails to file an answer, the creditor is regarded as defaulted on the loan. The judge can rule against the borrower and schedule a foreclosure sale for the lender. 

The sale commonly happens at least four months after the judge’s decision. A notice of the sale is published in a newspaper once a week for at least four weeks before the sale. If the borrower did not provide an answer or did not appear in court, the lender is not required to give notice of the sale.

What if an agreement isn’t reached in the settlement conference?

When an agreement can’t be achieved, litigation starts and the situation enters the discovery procedure. The discovery process involves the ability of the opposing parties in the litigation to request files from one another.  The borrower must send a petition for discovery into the creditor and vice versa.

The creditor subsequently records a motion for summary judgment should they think the debtor’s defense is weak or doesn’t establish wrongdoing. An arrangement of reference asks to figure out the entire amount owed to the creditor. After this total was calculated, the creditor can then ask the court to enter a default conclusion of sale and foreclosure.  Upon a judge signing the conclusion of sale and foreclosure, the creditor can envision an auction of this house and place the sale at a paper 30 days before the auction.

What can I do if the lender’s motion for summary judgment is denied?

To be able to keep on combating the foreclosure, the borrower should file a reply to the motion for summary judgment and contain documentation that supports their defense.  A copy must also be sent to the lender’s attorney. In the event the situation isn’t resolved by settlement or by movement, the litigation subsequently proceeds to trial.

What happens if a foreclosure goes through?

If a judge verifies the conclusion of the foreclosure sale and the date auction was set, the creditor needs to publish a notice of sale in a newspaper once a week for 4 weeks before the auction. You’re permitted to stay in your house before the date of this auction or before the property is moved to some other owner, generally the foreclosing lender or the third party buyer.  New York state doesn’t permit homeowners to repurchase or “redeem” their houses after their sale, in what’s generally known as the”statutory right of redemption,” which is allowed in other states, but might allow homeowners to remain in their houses around the ratification of this sale.

When the lawful right to remain in the former debtor’s home ends, the new owner can :

  • Offer the former homeowner a cash-for-keys deal (where the new owner offers the previous owner money in exchange for their removal from the property).
  • Force out the former homeowner.

Finally, when the house is foreclosed on, the entire debt owed by the borrower to the bank will normally exceed the foreclosure cost. The homeowner might need to pay the residual amount of money in the lack. Lenders can do that by garnishing the debtor’s salary or levying the debtor’s bank accounts. New York permits for a deficiency judgment to occur which re-estimates the worth of this house that’s foreclosed on to decrease the quantity of debt owed to the creditor.