If you’re facing a foreclosure in New York, you're entitled to specific protections under state law. For instance, in most cases, the homeowner who's behind in mortgage payments gets a 90-day right to cure the default before the foreclosure starts, as well as the right to participate in a settlement conference after a foreclosure begins.
Read on to learn more about how foreclosures in New York work and your rights during the process.
New York foreclosures are judicial, which means the foreclosing bank has to file a lawsuit in court. Here's how the process generally works.
Under federal law, in most cases, a loan servicer must wait until the borrower is over 120 days' delinquent before filing a lawsuit to officially start the foreclosure process. During this time, the servicer must send letters describing loss mitigation options.
If the property is an owner-occupied, one to four family dwelling, or a condominium unit, New York law requires that the foreclosing bank send a notice to the borrower 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:
If the lender or servicer doesn't send the 90-day notice at all or doesn't strictly comply with notice requirements, you could have a powerful defense that might result in a dismissal of the foreclosure action. (If you think the lender or servicer didn't comply with the 90-day notice law, consider talking to a lawyer to get specific advice about your situation.)
The bank officially starts the foreclosure by filing a lawsuit (a “complaint”) in court. You’ll get a copy of the complaint and a summons, along with notices advising you about the foreclosure process. (N.Y. Real Prop. Acts. Law §§ 1303, 1320).
You typically get:
After the foreclosure begins, the court will schedule a foreclosure settlement conference to take place within 60 days after the foreclosing bank files proof of service with the court clerk. The purpose of the settlement conference is to give the borrower and the bank an opportunity to work out an agreement to avoid foreclosure, like a loan modification.
The court will send a notice to the parties advising them of the time and place of the settlement conference, as well as the documents that they should bring to the meeting. (N.Y. Civil Practice Rule 3408). (Learn more in Nolo’s article New York Foreclosure Settlement Conferences.)
The rule requiring a settlement conference applies to borrower-occupied properties.
If you can't work out a way to avoid foreclosure at the settlement conference and you fail to answer the court action, the bank can get a default judgment from the court. On the other hand, if you file an answer, the bank can’t get a default judgment. So, in that situation, the bank will probably file a motion for summary judgment. This motion asks that the court grant judgment in favor of the bank because there’s no dispute about the important facts of the case, your defense lacks merit, or you haven't proven wrongdoing by the bank or servicer. If the court denies summary judgment, then a trial may happen. If the court grants summary judgment (or you lose at trial), the court will enter a final judgment of foreclosure against you.
If the foreclosing bank is granted 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).
“Reinstating” is when you catch up on the missed payments, plus fees and costs, in order to stop a foreclosure.
Under New York law, you may reinstate the loan at any time prior to final judgment and then the case will be dismissed. Or you could pay the arrearage after judgment, but before the sale, and the proceedings will be stayed (postponed). If you later default again, then the court can order enforcement of the judgment. (N.Y. Real Prop. Acts. Law § 1341).
Some states allow the borrower to redeem the home within a specific period of time after a foreclosure. New York law, however, doesn’t provide a post-sale redemption period. (To get details on redemption rights in New York, see Nolo’s article If I lose my home to foreclosure in New York, can I get it back?)
When the total mortgage debt exceeds the foreclosure sale price, the difference is called a “deficiency.” Some states allow the bank to seek a personal judgment, called a “deficiency judgment,” against the borrower for this amount, while other states prohibit deficiency judgments with what are called anti-deficiency laws.
In New York, the foreclosing bank can get a deficiency judgment if the borrower is served the complaint and summons personally, or if the borrower appears in the foreclosure action. To obtain the deficiency judgment, the bank must make a motion with the court within 90 days of the consummation of the sale. (The sale is consummated when the deed is delivered to the purchaser.) (N.Y. Real Prop. Acts. Law § 1371).
The amount of the deficiency is limited to the total amount of the debt minus the higher of:
If you have questions about the foreclosure process in New York or want to learn about potential defenses to a foreclosure, consider talking to a foreclosure lawyer. It’s also a good idea to make an appointment to speak to a HUD-approved housing counselor, especially if you want to learn about different loss mitigation (foreclosure avoidance) options.