Foreclosure Law In New York – All You Need To Know

by ECL Writer
Foreclosure Law In New York

Foreclosure can be a devastating experience for homeowners who fall behind on their mortgage payments. In New York, there are specific laws and procedures in place to protect homeowners and ensure that foreclosures are handled fairly and transparently. These laws are designed to help homeowners stay in their homes whenever possible, while also protecting the rights of lenders and mortgage servicers. In this article, will explore the foreclosure law in New York and provide an overview of the legal process for foreclosure, as well as some strategies that homeowners can use to avoid foreclosure or mitigate its impact.

What Is Foreclosure

Foreclosure is the legal process through which a lender or mortgage servicer can take possession of a property when the homeowner defaults on their mortgage payments. In other words, foreclosure is a way for a lender to recoup the money it lent to the homeowner by selling the property and using the proceeds to pay off the outstanding debt.

Foreclosure can occur when a homeowner is unable to make their mortgage payments, usually due to financial hardship. When a homeowner falls behind on their mortgage payments, the lender or mortgage servicer will typically send a notice of default, informing the homeowner that they are in danger of foreclosure. If the homeowner does not bring their payments up to date or work out a repayment plan with the lender, the lender may initiate foreclosure proceedings.

The foreclosure process can vary depending on the state and the type of mortgage, but generally involves a series of legal steps, including the filing of a foreclosure complaint, a court hearing, and the eventual sale of the property at auction. Foreclosure can have serious consequences for homeowners, including the loss of their homes and damage to their credit score, which can make it difficult to secure future loans or credit.

However, there are strategies that homeowners can use to avoid foreclosure, such as working out a repayment plan with the lender, seeking a loan modification, or pursuing a short sale or deed in lieu of foreclosure. It’s important for homeowners to understand their rights and options when facing foreclosure, and to seek the advice of a knowledgeable attorney or other experts if they have questions or concerns.

What Is Preforeclosure?

Preforeclosure is the early stage of the foreclosure process before the lender or mortgage servicer has actually taken possession of the property. It is the period during which the homeowner has fallen behind on their mortgage payments but the foreclosure process has not yet been initiated.

During the preforeclosure stage, the homeowner is still the legal owner of the property and has the opportunity to take action to avoid foreclosure. The lender or mortgage servicer will typically send the homeowner a notice of default, informing them that they are in danger of foreclosure and providing a deadline by which they must bring their mortgage payments up to date.

If homeowner is unable to bring their payments up to date, there are a few strategies they can use to avoid foreclosure. One option is to work out a repayment plan with the lender, which allows the homeowner to make up the missed payments over time while continuing to make regular monthly payments. Another option is to seek a loan modification, which can lower the interest rate or change the terms of the loan to make it more affordable for the homeowner.

In some cases, the homeowner may also consider selling the property through a short sale, which allows them to sell the property for less than the amount owed on the mortgage. This can be a good option for homeowners who are unable to make their mortgage payments and do not want to go through the foreclosure process.

How long is the foreclosure process in New York?

The foreclosure process in New York can vary depending on a number of factors, including the specific circumstances of the case, the type of mortgage, and the backlog of cases in the court system. However, in general, the foreclosure process in New York typically takes around 445 days from the filing of the foreclosure complaint to the sale of the property.

New York is a judicial foreclosure state, which means that the foreclosure process must go through the court system. After the lender or mortgage servicer files a foreclosure complaint, the homeowner has the right to respond and defend against the foreclosure. This can involve negotiating a repayment plan or loan modification with the lender, or contesting the foreclosure in court.

If the court finds in favor of the lender or mortgage servicer, the property will be sold at auction to the highest bidder. The proceeds from the sale will be used to pay off the outstanding debt, and any remaining proceeds will be distributed to the homeowner.

It’s worth noting that New York has implemented several foreclosure prevention measures in recent years, such as the mandatory settlement conference program, which requires lenders to offer homeowners the opportunity to negotiate a settlement or repayment plan before proceeding with foreclosure. These measures can help to slow down the foreclosure process and provide more opportunities for homeowners to avoid foreclosure or mitigate its impact.

How Can I Stop a Foreclosure in New York?

If you are facing a foreclosure in New York, you may feel like you have run out of options. However, there are several steps you can take to stop the foreclosure process and keep your home. Here are some of the most effective ways to stop a foreclosure in New York:

  • Negotiate with your lender: The first thing you should do if you are facing foreclosure is to contact your lender and try to work out a solution. Lenders may be willing to modify your mortgage or give you more time to catch up on missed payments.
  • File for bankruptcy: Filing for bankruptcy can stop a foreclosure in its tracks, at least temporarily. When you file for bankruptcy, an automatic stay goes into effect, which means that creditors, including your mortgage lender, must stop collection efforts. However, it is important to note that bankruptcy should be a last resort and may not be the best option for everyone.
  • Seek assistance from a housing counselor: There are several non-profit organizations that offer housing counseling services in New York. These counselors can help you explore your options, negotiate with your lender, and develop a plan to avoid foreclosure.
  • Apply for a loan modification: A loan modification is a permanent change to the terms of your mortgage that can help you avoid foreclosure. You may be able to lower your interest rate, extend the length of your loan, or even reduce the principal balance.
  • Sell your home: If you are unable to keep up with your mortgage payments, selling your home may be a better option than going through foreclosure. You can sell your home through a short sale, which means that you sell the property for less than the amount owed on the mortgage. While a short sale will still impact your credit, it is generally less damaging than a foreclosure.
  • Hire an attorney: If you are facing foreclosure, it may be a good idea to hire an attorney who specializes in foreclosure defense. An attorney can review your situation, help you understand your options, and represent you in negotiations with your lender.

In addition to these steps, it is important to be proactive and take action as soon as you realize you are in danger of foreclosure. Don’t wait until it is too late to seek help. By taking action early and working with your lender or a housing counselor, you may be able to avoid foreclosure and keep your home.

What Is the Foreclosure Process in New York?

If you fall behind on your New York mortgage payments, your home will be foreclosed by a judge.

90-Day Preforeclosure Notice

According to New York law, the lender or servicer must send the borrower a notice 90 days before the foreclosure process begins if the property is an owner-occupied, one- to four-family home, or a condominium unit. This notice must include among other things:

information on how to fix the default, as well as a directory of nearby, government-approved housing counseling organizations. New York Real Property Act 1304

You may have a strong defense that could lead to the foreclosure case being dismissed if the lender or servicer commenced the foreclosure but failed to deliver the required 90-day notice when required by law or failed to rigorously abide by notice requirements.

How Judicial Foreclosures Work

When a lender files a lawsuit to request a court order authorizing a foreclosure sale, judicial foreclosure is officially started. By serving you with a summons and complaint, together with details on the foreclosure procedure, the lender gives you notice of the lawsuit. (N.Y. Real Prop. Acts. Law § 1303, § 1320).

In general, you have 20 days (if the complaint and summons were served personally) or 30 days to file an answer (if service was by mail or another way). If you don’t answer the lawsuit, the lender will approach the court for a default judgment, which is likely to be granted, and use that to hold a foreclosure sale.

Yet the case will go through the court system if you decide to fight the foreclosure complaint. Following then, the lender could seek the court for a summary decision. A request for summary judgment urges the court to rule in favor of the lender because there is no disagreement regarding the crucial details of the case. The judge will enter a judgment and order your home sold at auction if the lender is successful in obtaining a summary judgment or if you lose your case in court.

Settlement Conference

According to New York law, the court must schedule a mandatory settlement conference for foreclosure cases involving borrower-occupied properties within 60 days of the evidence of service being filed with the court clerk. The lender and homeowner try to agree on a solution to avoid foreclosure during the settlement meeting. The parties will get a notice from the court informing them of the date, time, and location of the settlement conference as well as the materials they need to provide. (N.Y. Civil Practice Rule 3408).


A sale date is then set, published in a newspaper, and posted publicly in some cases. (N.Y. Real Prop. Acts. Law § 231).

The Foreclosure Sale

The lender typically places a credit bid on the transaction. The lender has the option of bidding more or less than the total amount owed, fees, and costs included.

When the lender is the highest bidder at the sale but offers less than the entire debt, it may be able to get a deficiency judgment against the borrower in various states, including New York. The property becomes “Real Estate Owned” if the lender is the highest bidder (REO). However, if a buyer, let’s say a third party, is the highest bidder and offers more than you owe and the sale results in excess revenues, which are funds over what is required to pay off all liens on your property, you are entitled to those additional funds.

New York Deficiency Judgment Laws

A deficiency judgment is a court-ordered judgment against a borrower for the remaining balance on a mortgage or other loan after a foreclosure or sale of the property. In New York, deficiency judgments are allowed but subject to certain limitations.

In New York, a lender can pursue a deficiency judgment after a foreclosure, but only in certain circumstances. Specifically, the lender can seek a deficiency judgment if the foreclosure sale price is less than the outstanding loan balance, and the lender has followed certain procedures to obtain the judgment.

To seek a deficiency judgment, the lender must file a separate lawsuit within 90 days of the foreclosure sale. The lawsuit must be filed in the same court that handled the foreclosure, and the borrower must be served with a copy of the lawsuit.

If the lender obtains a deficiency judgment, the borrower will be responsible for paying the remaining balance of the loan, minus the fair market value of the property at the time of the foreclosure sale. However, the borrower may be able to dispute the fair market value of the property through a hearing or appraisal.

It is important to note that New York has certain protections for borrowers who obtain mortgages on their primary residences. In these cases, the lender is generally prohibited from seeking a deficiency judgment. However, this protection does not apply to investment properties or second homes.

It is important to understand that a deficiency judgment can have serious consequences for a borrower, including wage garnishment, bank account levies, and damage to credit scores.

Statute of Limitations for Foreclosure in New York

The “Foreclosure Abuse Prevention Act” (S5473), which was passed in New York, severely constrained the situations in which the statute of limitations for a mortgage foreclosure action might be extended or reset.

According to this law, a lender’s voluntary termination of a mortgage foreclosure case does not halt the statute of limitations six-year clock from ticking. So, even if the lender eventually drops the foreclosure litigation, the ability of the lender to foreclose on a mortgage usually expires six years after the first date it accelerates the loan. The law went into effect on December 30, 2022, and it also retroactively affects any ongoing foreclosure case that was filed before that date and for which a final judgment and order of sale had not been implemented.

Where to Find Your State’s Statutes and More Foreclosure Resources

In this article, you’ll find details on foreclosure laws in New York, with citations to statutes so you can learn more. Statutes change, so checking them is always a good idea.

How to Find Federal Foreclosure Laws

If you’re looking for federal laws, you might want to visit the Library of Congress’s legal research website, which provides links to federal regulations and federal statutes.

How to Find State Foreclosure Laws

To find New York’s laws, search online for “New York statutes” or “New York laws.” Make sure you’re reading the most recent, official laws. Usually, the URL will end in “.gov” or the statutes will be on an official state legislature webpage.

What happens to tenants when a property is foreclosed in NY?

When a property is foreclosed in New York, tenants in the property have certain rights and protections under state and federal law. In New York, tenants have the right to remain in the property until the foreclosure process is complete, and the property is sold at auction. This means that tenants can continue to live in the property and pay rent to the landlord or owner until they are required to vacate.

Under the federal Protecting Tenants at Foreclosure Act (PTFA), which applies to properties with certain types of federally backed mortgages, tenants have additional protections. Specifically, the PTFA requires that tenants be given at least 90 days’ notice before being required to vacate a foreclosed property, even if their lease has not expired. Additionally, tenants with leases that were entered into before the foreclosure must be allowed to remain in the property until the end of the lease term, except in certain circumstances.

If the new owner of the property wants to evict the tenants after the foreclosure, they must follow the standard eviction process in New York. This includes providing the tenant with proper notice, filing a lawsuit in housing court, and obtaining a court order before the tenant can be evicted.

Tenants in foreclosed properties may also have legal claims against their landlord or the new owner of the property for violations of their rights. These claims may include failure to provide proper notice of the foreclosure or failure to maintain the property in a habitable condition.

If you are a tenant in a foreclosed property, it is important to understand your legal rights and protections and to seek the advice of a qualified attorney who can explain your options and help you navigate the complex legal process of foreclosure.

Getting Help from a New York Foreclosure Lawyer

Laws governing foreclosure are complex. Lenders and servicers may commit mistakes or overlook steps. You may have a defense that might force a restart of the foreclosure or leverage to negotiate an alternative if you believe your servicer or lender broke state or federal foreclosure regulations, missed a required step, or committed an error. To find out more about your rights, think about speaking with a neighborhood legal assistant or foreclosure defense attorney. You can learn more about several ways to avoid foreclosure from a lawyer.

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