The foreclosure process in New York is governed by state law and can vary depending on the type of loan and the specific circumstances of the case. In general, the process begins when a borrower defaults on their mortgage payments and the lender sends a notice of default. The borrower then has a certain amount of time to cure the default, typically by paying the past-due amount or reaching a repayment plan with the lender.
If the default is not cured, the lender can then initiate a foreclosure action by filing a complaint with the court and serving it on the borrower. The complaint will include the amount of the unpaid mortgage and any other charges, such as late fees and attorney’s fees. The borrower then has the opportunity to respond to the complaint and raise any defenses they may have.
Once the foreclosure action is commenced, the court will typically schedule a conference between the parties to try and reach a resolution. If no resolution is reached, the court will then set a date for a foreclosure sale. The sale will be conducted by the sheriff or a referee appointed by the court and will typically be held at the county courthouse.
The property will be sold to the highest bidder, with the proceeds of the sale going first to pay off the outstanding mortgage, then any other liens or judgments against the property, and finally to the borrower if there is any remaining equity.
If the property does not sell for enough to pay off the mortgage and other liens, the lender may be able to obtain a deficiency judgment against the borrower for the remaining amount. This means that the borrower may be held liable for the unpaid balance of the mortgage even after the property is sold.
There are several key laws and regulations that govern the foreclosure process in New York, including the Real Property Actions and Proceedings Law, the Banking Law, and the Fair Debt Collection Practices Act. And in this article Eastcoastlaws.com will outline all you need to know about New York foreclosure process and law
Mortgage Loans in New York
Mortgage loans in New York are subject to both state and federal laws and regulations. The main state law governing mortgage lending in New York is the Banking Law, which is enforced by the New York State Department of Financial Services (DFS).
In New York, there are two main types of mortgage loans: conventional loans and government-insured loans. Conventional loans are not insured or guaranteed by the government and are typically offered by banks and other private lenders. Government-insured loans, on the other hand, are insured or guaranteed by the federal government and include loans such as FHA loans and VA loans. In order to obtain a mortgage loan in New York, borrowers must typically meet certain requirements, such as having a good credit score and income and being able to make a down payment. Borrowers must also provide documentation such as pay stubs, bank statements, and tax returns to verify their income and assets.
In addition, New York has implemented the New York State Secure and Fair Enforcement for Mortgage Licensing (SAFE) Act, which requires that all mortgage loan originators be licensed and registered with the National Mortgage Licensing System (NMLS). This aims to ensure that all mortgage loan originators are qualified and have undergone background checks.
The interest rates and terms of a mortgage loan in New York can vary depending on the lender, the type of loan, and the borrower’s creditworthiness. New York state has also implemented a “Homeowner Protection Plan” which requires that lenders provide borrowers with a good faith estimate of the costs associated with the loan and a mortgage servicing disclosure statement.
It’s important for borrowers to shop around and compare rates and terms from multiple lenders before making a decision. They should also be aware of the potential risks and costs associated with a mortgage loan, such as closing costs and prepayment penalties.
What Happens if You Miss a Mortgage Payment?
If you miss a mortgage payment, the lender will typically send you a notice of default or delinquency, which will inform you that you have missed a payment and that you have a certain amount of time to cure the default. The time frame for curing the default will vary depending on the terms of your loan and the lender’s policies.
If you are unable to cure the default within the specified time frame, the lender may begin the foreclosure process. During foreclosure, the lender will file a complaint with the court and seek to repossess the property and sell it to pay off the outstanding mortgage.
In the meantime, the lender may also assess late fees and penalties, which will add to the total amount that you owe. Additionally, your credit score will be negatively affected by the missed payment, which can make it more difficult to obtain credit in the future.
Also, note that as soon as you know you will miss a payment, you should contact your lender to explain your situation and ask about options for avoiding foreclosure. Some lenders may be willing to work with you to find a solution, such as a loan modification or a repayment plan.
Also, the Servicemembers Civil Relief Act (SCRA) provides certain protections for military service members, such as the right to request a stay of a foreclosure proceeding, if they can show that their ability to pay their mortgage is materially affected by their military service.
What Is a Breach Letter?
Many New York mortgages have a provision that requires the lender to send a breach letter if the borrower falls behind in payments. This notice tells you that the loan is in default. If you don’t cure the default, the lender can accelerate the loan (call it due) and go ahead with the foreclosure.
When Does Foreclosure Start?
Foreclosure typically starts when a borrower misses one or more mortgage payments and is unable to catch up on the missed payments within a period of time. This period of time is referred to as the “grace period” and can vary depending on the terms of the mortgage loan and the lender’s policies.
When a borrower misses a payment, the lender will typically send a notice of default or delinquency, which will inform the borrower that they have missed a payment and that they have a certain amount of time to cure the default. This notice will also inform the borrower that if they are unable to cure the default, the lender may begin the foreclosure process.
If the borrower is unable to cure the default within the specified time frame, the lender may then file a complaint with the court and seek to repossess the property and sell it to pay off the outstanding mortgage. This is the start of the foreclosure process. It’s important to note that in some states, like New York, there is a judicial foreclosure process which means that the lender has to go through the court system to foreclose on a property. While in other states, like California, there is a non-judicial foreclosure process which means that the lender doesn’t have to go through the court system to foreclose on a property.
Preforeclosure Notice Under New York Law
If the property is a borrower-occupied, one- to four-family dwelling, or a condominium unit, New York law requires the lender to send a notice at least 90 days before starting the foreclosure. The 90-day time period runs concurrently with the 120-day preforeclosure period under federal law. This notice provides, among other things:
- information about the default, and
- a list of government-approved housing counseling agencies located near you that provide free or very low-cost counseling. (N.Y. Real Prop. Acts. Law § 1304).
If the lender or servicer doesn’t send the 90-day notice or doesn’t strictly comply with its requirements, you could have a defense that might result in a dismissal of the foreclosure action. Consider talking to a lawyer to get specific advice about your situation if you think the lender or servicer didn’t follow the 90-day notice law.
State Foreclosure Laws in New York
Approximately half of the states, including New York, require the lender to file a lawsuit in court to foreclose. The lender gives notice of the suit by serving you a summons and complaint, along with information about the foreclosure process. (N.Y. Real Prop. Acts. Law § 1303, § 1320). You typically get:
- 20 days to file an answer with the court, if the complaint and summons are served in person, or
- 30 days, if service is by mail or another method.
Foreclosure Settlement Conference
For homes owned by borrowers, the court will arrange a foreclosure settlement meeting within 60 days of the lender filing proof of service with the court clerk after the foreclosure process has started. The conference’s goal is to provide participants the chance to negotiate a deal to postpone foreclosure, such as a loan modification.
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. Civil Practice Rule 3408 of New York.
Also Read: INTESTATE SUCCESSION IN NEW YORK
What Happens If You Do or Don’t File an Answer
The lender may get a default judgment from the court if you are unable to avert foreclosure at the settlement meeting and you fail to respond to the court action. The ruling will authorize the lender to conduct a foreclosure auction.
However, the case will go to litigation if you reply to the lawsuit. The lender could then ask for a summary judgment from the court. 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 order the house auctioned in a foreclosure sale if the court grants summary judgment for the lender or if you are found guilty after a trial.
Notice About the Foreclosure Sale
If the lender gets a final judgment of foreclosure against you, a sale date is set. Notice of the sale is published in a newspaper and posted publicly (in some cases). (N.Y. Real Prop. Acts. Law § 231).
The Foreclosure Sale
The process ends with a foreclosure sale. The lender usually makes a bid on the property using what’s called a “credit bid” rather than bidding cash. With a credit bid, the lender gets credit up to the amount of the borrower’s debt. The highest bidder at the sale becomes the new owner of the property.
Reinstating the Mortgage Before the Foreclosure Sale in New York
In order to prevent a foreclosure, you must “reinstate” by making up any missed payments and paying any associated fees. Prior to the final verdict, you are permitted to reinstate the loan at any moment under New York law, after which the lawsuit would be dismissed. Additionally, you could stop the proceedings by paying the arrearage after the verdict but before the sale (postponed). If you later default once more, the court may order that the decision be enforced. (New York Real Property Act, Section 1341).
Deficiency Judgments Following a Foreclosure Sale in New York
A foreclosure sale may not always generate enough revenue to cover the entire debt balance. A “deficiency balance” is the amount that exists between the sale price and the total amount owed. In several states, including New York, the lender is able to obtain a “deficiency judgment” against the borrower for this sum.
If you are physically served with the complaint and summons or you participate in the foreclosure process, the lender may get a deficiency judgment in New York. Within 90 days after the sale’s completion, the lender must file a motion with the court to get the deficiency judgment. (When the buyer receives the deed, the sale is complete.) (New York Real Property Act, Section 1371).
The total amount of the debt, less the larger of the fair market value or the sales price, is the maximum amount of the deficiency. (New York Real Property Act, Section 1371).
Also Read: REAL ESTATE TRANSFER TAXES IN NEW YORK
Statute of Limitations for New York Foreclosures
According to the “Foreclosure Abuse Prevention Act” (S5473) of New York, a lender’s voluntary suspension of a mortgage foreclosure case does not halt the statute of limitations six-year clock from ticking.
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.
How long does a house stay in pre-foreclosure in New York?
In New York, the pre-foreclosure period can vary depending on several factors, including the type of loan, the lender’s policies, and the specific circumstances of the borrower. In general, the pre-foreclosure period can last anywhere from a few months to a year or more.
The pre-foreclosure period begins when the borrower misses one or more mortgage payments and is unable to catch up on the missed payments within a specified period of time. The lender will then send a notice of default or delinquency, which will inform the borrower that they have missed a payment and that they have a certain amount of time to cure the default. This notice will also inform the borrower that if they are unable to cure the default, the lender may begin the foreclosure process.
If the borrower is unable to cure the default within the specified time frame, the lender may then file a complaint with the court and seek to repossess the property and sell it to pay off the outstanding mortgage. This is the start of the foreclosure process.
In New York, the foreclosure process is judicial, which means that the lender has to go through the court system to foreclose on a property. The time frame for the foreclosure process can vary depending on the court’s schedule and the specific circumstances of the case.
The lender must provide the borrower with a notice of pendency, the notice must be filed with the county clerk and served on the borrower by personal service or by mail, the notice must be filed with the county clerk within 90 days after the date the notice of pendency is served. The notice of pendency is generally recorded in the county clerk’s office within 90 days after the date of service. The borrower has 20 days to file an answer, if the borrower does not file an answer, the lender may seek a default judgment.
If the borrower files an answer, the case will proceed to a trial, the trial can take several months, or even more than a year. If the lender wins the case, the court will order the sale of the property to pay off the outstanding mortgage. During the pre-foreclosure period, the borrower may be able to work out a solution with the lender, such as a loan modification or a repayment plan, to avoid foreclosure and save their home.
How long does the foreclosure process take in NY?
The average New York State foreclosure case lasts around 2.5 years, according to the New York State Comptroller. In actuality, your location affects how long a foreclosure case takes. Foreclosure cases in upstate New York typically take 1.5 years, and downstate cases often take 3.5 years.