If you’re facing a foreclosure in New York, you're entitled to certain protections under state law. For example, you get a three-month right to cure the default before the foreclosure starts, and the right to participate in a settlement conference after 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.
If the property is owner-occupied, New York law requires that the foreclosing bank send a notice to the borrower at least 90 days before starting the foreclosure. This notice provides, among other things:
This notice requirement is in effect until January 14, 2020. After that time, the law applies only to some high-cost, subprime, and non-traditional home loans.
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 and is in effect until February 13, 2020.
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 doesn’t prove wrongdoing. 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.
But most loan contracts allow the borrower to cure the default and reinstate the loan by a specific deadline. Check your loan documents to see if you get the right to reinstate and to find out the deadline to complete a reinstatement. (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 lender 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.