The Pre-Foreclosure Process

pre foreclosure process

The COVID-19 pandemic is continuing to affect the financial stability of many Americans, leaving some people without the means to make payments on their mortgages. If you are a New Yorker who is behind on mortgage payments and you are concerned about the potential of your lender foreclosing on your property, know that we are here for you and we want to help you fight for your legal rights. Governor Cuomo and the New York legislature recently extended New York’s eviction and foreclosure moratorium, but the moratorium should not necessarily be the one thing you rely on to completely protect your property from foreclosure. Also, note that the moratorium is only temporary and that missed mortgage payments will become a problem eventually. In the event you find your home in pre-foreclosure or foreclosure, please reach out to our experienced attorneys at the Office of Yuriy Moshes, P.C. We are ready to work with you to help you protect your home.  Specifically, our knowledgeable and talented foreclosure attorney, Gennady Litvin wants to help you find ways to potentially save your home or find alternatives to foreclosure that could save your credit. 

What Is Pre-foreclosure

Pre-foreclosure refers to the initial steps in the foreclosure process. Pre-foreclosure is when the borrower has missed mortgage payments but official foreclosure court proceedings have not begun. When a home is in pre-foreclosure, there is still time to make things right and avoid foreclosure.   

How The Pre-foreclosure Works

In pre-foreclosure, the lender files a notice of default on a borrower’s property because the borrower has failed to make payments on the mortgage. The notice of default informs the borrower that the lender intends to foreclose on the property if the borrower does not make up for the payments. So, pre-foreclosure refers to the time period after the borrower receives the notice of default and before the lender officially files foreclosure paperwork in court. 

Pre-Foreclosure Process

How does the pre-foreclosure process work? New York law stipulates that lenders must wait 120 days after the missed payments before officially filing to foreclose on the property in court. New York law also requires lenders to send the borrower a notice of default 90 days before any foreclosure proceedings begin. So, how long does it take to go to pre-foreclosure? Typically, a home will go to foreclosure in the following steps: 

  1. a borrower will miss  a payment, 
  2. the lender will then wait 30-days for the payment to become truly delinquent
  3. then the lender will send the borrower a notice that official foreclosure papers will be filed in court in 90 days if the borrower fails to pay. 

New York’s current foreclosure and eviction moratorium will end on August 31, 2021. This means that you may find yourself in pre-foreclosure if you still have a missed payment or payments when the end of August arrives and you are still unable to catch up on your payment(s). If you anticipate problems with your payments because of your financial situation or because you are severely behind on payments currently, do not wait to take action. You should connect with an attorney as soon as possible to discuss the ways that you can avoid dealing with foreclosure proceedings. 

Notice Of Default

A notice of default simply is a document that informs a borrower that their mortgage payments are behind and that the lender may file for foreclosure of the property if the payments are not brought up to date. New York law requires lenders foreclosing on a property to file a notice of default in court 90 days before filing an official foreclosure complaint in court. 

A typical notice of default will include: 

  • A statement informing the borrower that the loan is in default (that payments were missed);
  • A timeframe in which the default can be cured;
  • Explanations of how to cure the default; and
  • Notice that failing to cure the default will result in the lender filing a foreclosure complaint in court. 

How Long Is The Pre-Foreclosure Process

How long does the pre-foreclosure process last? Great question. In New York, the pre-foreclosure process lasts at least 120 days. Lenders will send a notice of default to the borrower 30 days after the late payment. Then, state law requires that lenders wait an additional 90 days after the first notice before filing a foreclosure complaint in court. 

Once the lender waits the 90 days required by law, the lender will then file a foreclosure complaint in court. Filing the foreclosure complaint officially begins the foreclosure proceedings. After the complaint is filed, the borrower will have a set amount of time to respond to the complaint and explain why foreclosure is not appropriate. If the borrower fails to respond to the complaint, the court can enter a default judgment against the borrower, which would allow the lender to finalize the foreclosure on the property and begin the foreclosure auction process or sale process.

how long is the pre foreclosure process

How long does a house stay in the pre-foreclosure? Technically, the house stays in the pre-foreclosure process until the lender files official foreclosure documents with the court. This means that you can still save your home from the pre-foreclosure process up until the point that the lender begins the official foreclosure proceedings in court. How long can a house stay in pre-foreclosure? Typically, the pre-foreclosure process will last around 120 days, but this time-period can be longer if the lender files the foreclosure complaint after the required 120-day waiting period. 

How To Get Out Of Pre-foreclosure

Thankfully, the pre-foreclosure process is still a point in which it may be easier for some homeowners to escape going into the full foreclosure process. Below, you can find some common paths out of the pre-foreclosure process:  

Loan Modification

Loan modification refers to when a borrower comes to an agreement with the lender to modify (a.k.a. restructure) the existing loan. Loan modification allows the borrower to renegotiate the mortgage agreement with the lender to find new contractual terms that are more favorable to the borrower’s situation. This is especially helpful when unexpected income changes arise. The downside of loan renegotiation is that the borrower may have to agree to a longer repayment period. The upside to loan remodification is that lenders are often motivated to negotiate new loan agreement terms with the borrower because the lender wants to avoid the hassle of the foreclosure process. 

Refinancing

Refinancing the loan typically means that you move your loan from your current lender to a new lender, allowing you to negotiate new terms and (potentially) a lower payment on your mortgage. Refinancing is not available once the foreclosure process begins, so refinancing the loan during the foreclosure process can be tricky, but it is feasible. Working with an attorney to refinance your loan can help you find the best options. 

Pay The Outstanding Balance

The fastest and simplest way to exit the pre-foreclosure process is to simply pay the outstanding balance on your loan. Sadly, paying the outstanding balance is often not an option once homeowners enter the pre-foreclosure stage.

Sell The Home: Short Sale

A short sale refers to when a borrower quickly sells the property for an amount less than what is required to cover the debt owed on the loan. Short sales typically allow the borrower to agree with the lender that the property can be sold for less than the amount owed on the loan, and the lender agrees to accept less than the outstanding balance owed on the loan. By selling the property in this manner, the borrower is able to escape the foreclosure process because the lender agrees to accept less than what you owe. Sellers in short sales are not always people who are underwater in their mortgage. Sometimes, sellers engage in short sales because the market is not great and the sellers have a property/properties that they need to dispose of. Regardless of whether the property in a short sale is in foreclosure, pre-foreclosure, or neither,  working with an attorney in the short sale process can help you ensure that your agreements with the lender will satisfy the loan and help you truly escape the foreclosure process. 

Advantages And Disadvantages Of Pre-foreclosure

Pre-foreclosure often means that there is still ample time to save your home and reverse the issues that lead you into the pre-foreclosure process. Lenders are more likely to work with borrowers when the borrowers are still in the pre-foreclosure stage, compared to when borrowers find themselves involved in foreclosure proceedings. During the pre-foreclosure stage, if you do not know how to solve your pre-foreclosure problems, contacting an experienced foreclosure attorney can help you save your home. An experienced foreclosure attorney can help you consider all the possible ways in which you can reverse the pre-foreclosure process and escape the headache of foreclosure. 

FAQ section (answer for these questions)

How long does it take for a pre foreclosure to foreclose?

The pre-foreclosure process typically lasts 120 days in New York.

What happens after pre-foreclosure?

Once the lender properly files the foreclosure complaint with a court, the pre-foreclosure process ends and the foreclosure process begins. The foreclosure process typically involves the court in New York, meaning that borrowers would be wise to have an attorney at this point.

Can a pre-foreclosure be stopped?

Absolutely. Some of the options above explain how a pre-foreclosure can be stopped. Importantly, having an experienced pre-foreclosure attorney can help you consider all of the options that are in your best interests.

Do you have to pay cash for pre-foreclosure?

Not necessarily. This depends on your particular circumstances. Contact our office to learn whether you may have alternative options to paying cash for solutions to the pre-foreclosure process.

What is the difference between pre foreclosure and foreclosure?

Pre-foreclosure refers to when the lender realizes that the borrower is late on mortgage payments and the lender notifies the borrower that payments are due if the borrower wants to avoid foreclosure. Alternatively, foreclosure (in New York) refers to when the borrower has continued to fail to make payments for at least 120 days, and the lender then has the right to file a foreclosure complaint in court that begins the official foreclosure process on the property in question.

Get  Foreclosure Legal Advice From An Attorney

At the Law Offices of Yuriy Moshes, P.C., we understand how scary and confusing the pre-foreclosure process can be. We want to help you protect your interests and find the best way out of the pre-foreclosure process. Our attorneys want to help you, and they are waiting for you to reach out. Contact us today for a free consultation.