A Guide to New York Foreclosure Laws and Procedures

In New York City, mortgage distress is at an all-time high. U.S. Census data reveals that an average of 11.8% (533,313) of New Yorkers were delinquent on their mortgages in 2020. This number is over three times higher than the reported cases during the Great Recession

Fortunately for mortgage lenders, they can recover their losses by pursuing a foreclosure lawsuit.

Understanding Mortgage and New York Foreclosure Laws

When a person takes out a loan to purchase real estate, they are required to sign two documents: first, a promissory note that details the repayment terms and the borrower’s written promise to pay, and second, the mortgage that gives the lender a security interest in the property.

Should the borrower fail to make payments, the lender can recover the loan amount by selling the property in a foreclosure sale.

New York follows judicial foreclosure guidelines. This means that foreclosure cases are heard in the court. The foreclosure process begins when the mortgage lender files a court complaint against the defaulting borrower.

Note that judicial foreclosures are only applicable for real property like condominiums and traditional single-family homes.

Here’s a step-by-step guide to help you better understand the foreclosure process in New York:

Borrower Makes a Missed Mortgage Payment

A homeowner has 120 days from the date of a missed payment to try to refinance, modify their loan, or seek other mitigation options. Beyond that, they are at risk of foreclosure.

90-Day Pre-Foreclosure Notice

New York courts require lenders to send a 90-day foreclosure notice to the defaulting homeowner before proceeding with a foreclosure. The notice contains information on how to cure the default and a list of government-accredited counseling agencies that may help the borrower. This time period runs alongside the 120-day waiting period mentioned previously.

Issuance of Demand Letter

Within 45 to 60 days after a missed payment, the lender will send a demand letter to the borrower. This serves as the final warning that the borrower must pay their debt before a lawsuit is brought to court.

Filing of Summons and Complaint

After 90 days, the lender may file a Summons and Complaint, along with a “lis pendens.” The summons notifies the defendant that a case has been filed against them, and the complaint explains why the lender believes they should pursue the case. The lis pendens notifies people that there’s an open lawsuit related to the property in question.

New York laws require plaintiffs to properly serve these legal documents through an eligible process server. Within 20 days of service, the lender’s attorney must file an Affidavit of Service which serves as proof that the documents were successfully delivered.

Defendant Responds to the Complaint

Defendants who were served in person have 20 calendar days to respond to the complaint. If a defendant was not served in person, they are given a 30-day window to respond.

The borrower can file one of the two documents:

  1. An Answer: This document details the defendant’s side of the story, including their reason for the missed payment and any legal claims they have against the lender.
  2. A Notice of Appearance: This document is less detailed than an Answer. It simply informs the court of the defendant’s intent to participate in the case along with a request to receive copies of the legal documents.

Filing of the Certificate of Merit

The lender’s attorney must file a “Certificate of Merit” which states that the attorney has reviewed the mortgage documents. All critical paperwork, including the mortgage, promissory note, and loan modifications, must be attached to the Summons and Complaint.

Holding of a Mandatory Settlement Conference

Within 60 days of filing the affidavit of service, a settlement conference will be scheduled. During the session, the lender and the defendant will try to find a resolution to the case.

If an agreement is reached, the foreclosure will be dismissed. If not, the case will proceed.

Post-Settlement Conference

If an agreement has not been reached, the lender may also file a motion for summary judgment in an attempt to win the case without a trial. If the defendant did not respond to the complaint, the lender may file a motion for default judgment and order reference.

If both motions are approved by the court, a court-appointed referee will calculate the amount the defendant owes to the lender. Once the amount has been determined, the lender may pursue a Judgement of Foreclosure and Sale—a legal document that enables them to sell the defendant’s property.

Auctioning of Property

If the court approves the motion for judgment of foreclosure and sale, the lender may proceed with scheduling an auction date for the home. An action notice will be posted on the property’s door, and an official announcement will be published in a newspaper.

During the action, a minimum bid is set by the lender, and the property is sold to the highest bidder. If the bids do not reach the minimum, the home will go to the lender. Also, if the property was sold for less than the amount that the defendant owes, they are required to pay the remaining balance.

Serve Foreclosure Documents in New York with Ease

For a foreclosure case to move forward, a Summons and Complaint must be served properly to the defaulting borrower. Otherwise, the court may dismiss the lawsuit entirely.

The experienced and trained process servers at Serve Index LLC will ensure that your legal documents are delivered in a timely manner. Along with error-free service of process, clients can also expect real-time GPS tracking, progress updates, and photo documentation of the service.

Call us at 1-888-994-6339 to get a free quote today.


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