What Is a Judicial Foreclosure and How Does It Work in New York?

There are two foreclosure types: judicial and non-judicial. A judicial foreclosure refers to when a foreclosure case goes through the court system. 

You may be wondering – how long does a judicial foreclosure take? The time frame of this kind of foreclosure varies drastically from case to case, but they are often quite long. One case might take a few months, while another may take years. 

And now, with Governor Cuomo’s foreclosure moratorium in place, the judicial foreclosure process will be stretched even longer. Yet, if you find yourself facing a judicial foreclosure, you should not grow used to having extra time. It’s time to prepare yourself – get in contact with us today for legal advice. 

Now that you know the basic judicial foreclosure definition, let’s take a look at how the process usually works in New York (when a foreclosure moratorium is not in place). 

How Does Judicial Foreclosure Work in New York?

In New York, all real property foreclosures must go through the court. The entire process takes, on average, one year – from the time that the lender initiates the case to the time when the home is sold. In New York, the general steps are as follows: 

– Summons and Complaint (the lender starts a case against you with Summons and Complaints legal papers)

  • Answer (you answer the Summons and Complaint and give the court your side of the story)
  • Settlement Conference (you and the lender have the chance to agree on a settlement)
  • Discovery, Evidence, and Trial (if the settlement conference was not fruitful, there will be a basic trial) 
  • Judgment (If the Judge orders the foreclosure, the house will go up for auction)
Judicial Foreclosure in New York

Judicial Foreclosure Example

NY Courts has a flowchart detailing the foreclosure process in New York. Here’s an example, put into real-world terms. 

Mary and John purchased a house a few years ago for $400,000. They placed 10% down and borrowed the rest of the amount ($360,000). Now, the house has a $325,000 market value. Mary was laid off from her job, and Peter has taken a pay cut – thus, their reduced income means they can’t afford their mortgage payments. They live in New York, where foreclosures are judicial.

Let’s say that there was no foreclosure moratorium at the time – so the lender sent Mary and John a pre-foreclosure notice 90 days in advance before beginning a court case. Mary and John decided to let the foreclosure proceed. 

After a period of time passes, Mary and John receive a “lis pendens” Summons and Complaint in-person. Since it was in-person, they had to respond within 20 days. However, they thought there was no chance of keeping the house, and they chose not to respond. 

The court then issued a default judgment authorizing the sale of the property. This will happen if you don’t respond to the Summons and Complaint. The property went up for auction, and Mary and John lost the home. This could have been prevented if they had sought legal counsel and answered the Summons and Complaint – or, at least, they could have bought themselves some time to gather a partial payment. 

Steps in a Judicial Foreclosure

Now, let’s take a closer look at each step of the process. 

Steps in a Judicial Foreclosure

Preforeclosure Loss Mitigation Review Period

This is the process in which the lender and the borrower work together to try to avoid foreclosure. Some options include receiving a loan modification, creating a forbearance agreement, or going on a repayment plan. There’s also the option to hold a short sale instead of going through with a foreclosure. Under federal law, in most cases, lenders must inform borrowers about their loss mitigation options. 

The Lender or Current Owner of the Loan Files a Lawsuit

If you did not apply for loss mitigation, none is applicable to you, or the options aren’t enough to get you back on track, the lender may file a lawsuit. 

Complaint and Summons

The lender will file an official complaint for foreclosure, listing the reasons why a judge should issue the foreclosure judgment. You will be served the Complaints and Summons papers, and they will inform you of how much time you have to respond. Typically, this will be 20-30 days, depending on if you received it in-person or in the mail. 

Judgment

If you choose not to respond to the Complaint and Summons, you will likely receive a default judgment and automatically lose the case. We suggest filing an answer because this increases the chances of the case proceeding to trial. 

Deficiency Judgments

If your house is sold off for less than the mortgage debt you owe, there will be a deficiency. In some states, the foreclosing party can get a deficiency judgment against the borrower, so that you would still be liable to pay that amount. 

Foreclosure Auction

After there is a foreclosure judgment, a date for the sale of the property will be set. If a third party bids the highest amount on the home, they shall be the property’s new owner. In most cases, though, the foreclosing party will bid the highest and own the property. Usually, the party will use a “credit bid”, meaning that the bid is the debt and any penalties you owe them. 

Leaving After Foreclosure

The amount of time you can stay in a foreclosed home depends on your state and the length of the redemption period. In New York, you would not have the right to a redemption period after the sale on any account. 

What’s a Redemption Period

If a state allows a redemption period, this means there is an amount of time in which you may repurchase the house after the foreclosure. Otherwise, you must vacate the premises or face eviction. 

Judicial Foreclosure States

Refer to the list of judicial foreclosure states below to see what kind of foreclosure your state primarily has.

Judicial ForeclosureNonjudicial Foreclosure
States that predominantly use this type of foreclosureConnecticut, Delaware, District of Columbia, Florida, Hawaii, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, New Jersey, New Mexico*, New York, North Dakota, Ohio, Oklahoma, Pennsylvania, South Carolina, Vermont, and WisconsinAlabama, Alaska, Arizona, Arkansas, California, Colorado**, District of Columbia (sometimes), Georgia, Idaho, Maryland**, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, North Carolina, Oregon, Rhode Island, South Dakota, Tennessee, Texas, Utah, Virginia, Washington, West Virginia, and Wyoming

If you have received a Complaints and Summons (or if you are still in the loss mitigation phase), fill out a contact form on our site. We’d be happy to provide you with a free consultation to determine your needs and your likelihood of having the foreclosure dropped. 

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