Foreclosure is a legal process of recovering an unpaid mortgage amount by the lender against the borrower by taking ownership of the mortgaged property or auctioning it. The unpaid loan is also called a defaulted loan. Another reason for foreclosure can be non-compliance with the terms and conditions of the mortgage deed. The process and time period of the foreclosure process varies from state to state. Foreclosure can stem from varied reasons such as,
- Loss of employment;
- Medical emergency;
- Divorce; or
- Disability, etc.
It is necessary to know what documents are involved in the process and why these are important.
Foreclosure documents contain vital information such as the reason for the foreclosure, the loan amount, etc. For example, one missed payment cannot be the grounds for initiating a foreclosure against the borrower or mortgage holder, a continuous period of 120 days of missed mortgage payments is a prerequisite for initiating a foreclosure action against him. One missed payment can only result in a Missed Payment Notice by the lender to the borrower. Two missed payments will result in a Demand Letter, another missed payment and you will get a Notice of Default.
Foreclosure not only results in the loss of a house but also shows up on the borrower’s credit report and will continue to haunt him for at least seven to ten years. This makes it even more important to avoid foreclosure if possible. Trying to ward off a foreclosure can be extremely nerve-racking and confusing but it is possible to postpone or even stop it. An attorney highly experienced in foreclosure might be the best choice in the current circumstances. Consult a foreclosure attorney.
Judicial Foreclosure vs. Non-judicial Foreclosure
The foreclosure sale may be of two types depending on the state wherein the property is situated:
- Judicial foreclosure or
- Non-judicial foreclosure
In the case of a judicial foreclosure, a lawsuit must be filed in court by the lender against the borrower. It is allowed in all the states of the country. Whereas, in a non-judicial foreclosure which is also called Foreclosure by the power of sale, the foreclosure process does not require supervision of the court but it can be done only if there is a power of clause specified in the mortgage deed. A neutral third party, whois already mentioned in the deed of the property will overlook the entire process. Another point of difference between the two types of foreclosure is the timeline of the entire process. Judicial foreclosure can take months or even years because of the complexities and the number of steps involved in the process whereas non-judicial foreclosure can be done in a matter of months or sometimes even a couple of days. Either way, the end result of both processes is the sale of the house.
New York is a judicial foreclosure state. Here is a flowchart to show the foreclosure process in New York. Since in judicial foreclosure, there is a required court process, there tends to be more paperwork and documents to be filed and answered. It can be hard to navigate through the process without any knowledge and experience. Some of the most common documents involved in the foreclosure process are explained below for your knowledge. But it is always better to seek a professional opinion when there is so much at stake.
Original Loan Documents
These include the promissory note, a document containing the agreement between the borrower to repay the mortgage loan and until then the lender shall keep the note. Also, loan documents from the loan servicer which may be a bank.
Complaint for Foreclosure
In a judicial foreclosure, this complaint contains the reason for foreclosure, claims of the lender, the promissory note, identification of the property, the defaulted amount, and a list of defendants with a description of their interest in the property.
Notice of Default
This Notice is given by the lender to the borrower notifying him that he is behind on his mortgage payments, and if he does not pay by a certain date, the borrower shall be in default of the mortgage agreement, giving the lender a right to resort to foreclosure to recover.
Notice of lis pendens
“Lis pendens” is a Latin term which means “pending litigation”. It is actually the very first step in any foreclosure proceeding. It is a notice which is delivered to the county courthouse to be attached to the property deed, showing that the property is under foreclosure proceedings.
It is given in a situation wherein the foreclosure sale, the price of the property sold in a foreclosure sale is less than the amount remaining on the mortgage. It is called a deficiency. This means that the defendant even after losing his house, is still liable to pay this deficiency amount to the plaintiff.
It is a document that determines the value of the house to ensure that the price reflects the condition of the house, its age, location, and features such as the number of bedrooms, bathrooms, etc.
Notice of Acceleration
It is also known as an Acceleration Notice or Notice of Intent to Foreclose. It is a document from the lender which warns the defendant that all of his mortgage payments, including any past, missed payments, will be due within the next 30 to 90 days.
Notice of Sale/Auction
This notice states the property will be sold at a public auction, the address and the legal description of the property, the date, time, and location where the foreclosure sale will take place.
Deed in Lieu of Foreclosure
This is a document that transfers the title of ownership of the foreclosed property from the borrower to the lender in exchange for being relieved of the mortgage debt.
Final Judgment Document
Once a foreclosure case has successfully completed through the court proceedings, the judge will sign the final judgment. This provides the lender with the legal right to sell the property and to recover any losses which have accrued to him from the nonpayment of the loan.
How are Foreclosure Papers Served?
The foreclosure summons and complaint can be served in person or by mail depending on what the law of the state requires. The papers must be served by a process server who can be the Sheriff, someone appointed by the court of law. A process server is typically a state licensed agent that is able to perfect service of legal documents.
The process of serving a notice has a huge impact on both the lender and the borrower. Proper and improper service can hamper the entire process and also the timeline of foreclosure. The lender has the duty to inform the borrower formally that a legal action has been initiated against him and the borrower has the right to know about such action so that he prepares to defend himself.
The law regarding service of notice also varies from state to state. The kind of notice that will be sent also depends upon whether the foreclosure is a judicial foreclosure or a non-judicial foreclosure. In some states, notices are required to be served personally on the borrower whereas, in some states, they can be mailed to the borrower directly. If personal service is required by the law of the state, then the Sheriff, process server, or someone appointed by the court will serve the summons and complaint to the borrower. The service of these documents will initiate the foreclosure process against him. The process server will attempt to find the borrower a couple of times but if he is unable to locate him, he will tape the papers to the front door of the house.
Where Can I Get Foreclosure Documents?
If you have not been served with foreclosure documents but you believe you are in foreclosure, you may view all filed foreclosure cases online. Once the foreclosure proceeding begins against a property, the documents related to it become public records.
According to the Internal Revenue services, documents related to a foreclosure should be kept for at least a period of seven years after the property has been sold off. Documents such as the mortgage deed and the promissory note should be kept for at least for as long as the owner owns the property. But it is always better to keep a copy, a physical document or electronic, preferably both, of all the payments that have been made for the property. Apart from documents containing details of mortgage payments, any deeds related to the property, or certificates of satisfaction of debt or release from liability are also important documents.
Get Help From Attorney With Foreclosure Papers
It is always better to seek professional guidance when you are going through such a grueling process. It can be especially harder to navigate your way with all the changes in legislation brought by the coronavirus pandemic. The Coronavirus Aid, Relief, and Economic Security or the CARES Act were signed on March 27, 2020, which restricted any foreclosure activity by servicers of federally backed mortgage loans. It was supposed to be a temporary moratorium on evictions of some renters subject to certain conditions such as the loan servicer may not initiate a foreclosure. This moratorium proceeding, judicial or non-judicial against a homeowner. People whose income have been directly impacted because of COVID-19, furloughed employees, or who are self-employed are eligible under this legislation. No notice of foreclosure or auction sale could be sent etc. This moratorium has been extended until January 1, 2021. New York Governor Cuomo on June 17, 2020, signed legislation that protects homeowners who were facing financial adversities because of the pandemic.
Whether you can claim the benefit of these changes is something that would require proper analysis and professional guidance. An attorney can guide you on what will be your best course of action in your particular case, on what documents are required, how and when to submit them, and can also help you navigate through the court rules. Your lender already has an attorney looking after their best interest, you should have one too. It could be difficult to fight this battle on your own without proper guidance. Get a free case valuation from a foreclosure attorney.
A: Yes, foreclosure documents are public documents. Once the foreclosure proceedings are formally initiated, the foreclosure papers can be obtained by the public.
A: Yes, you can dispute the foreclosure by replying to the complaint in writing. Your answer must include your defenses and the reasons why the lender should not be able to foreclose on the property. This is the case in judicial foreclosure states. On the other hand, in a non-judicial foreclosure state, the borrower can ask the court for a temporary injunction on the foreclosure sale.
A: Foreclosure documents are public documents. Once the foreclosure proceedings are formally initiated, the foreclosure papers can be obtained by the public. You can view them online through the electronic court system.
A: If the foreclosure proceedings cannot be postponed or stopped, the court will hold an auction for the property, and sell to the highest bidder to recover the unpaid amount of loan. If there is still a deficiency in the sale price, the lender may sue you to recover that amount even after having sold your house.
A: In some cases, the lender or bank may allow you to make an offer. If however, the property has already been foreclosed, it is like any other property which can be purchased in the marketplace.