Foreclosure Laws in New York State
New York law provides a judicial procedure for foreclosing on a mortgage or deed of trust in default. A lender must initiate the foreclosure procedure by filing a lawsuit against the borrower. A non-judicial foreclosure procedure, which was available in New York in some circumstances, has been repealed, effective July 1, 2009. Changes to state law that were enacted in 2008 added requirements for proceedings involving subprime, high-cost and nontraditional home loan borrowers. The 2008 enactment also added foreclosure notice requirements and other provisions that apply in residential foreclosure actions.
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Foreclosure Proceedings
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When a lender files a foreclosure action in a New York court, a copy of the complaint and summons must be provided to the borrower. In an action to foreclose on a residential property with one to three units, the summons must contain a boldface notice advising the borrower that he may lose his home if he fails to respond to the complaint.
In addition, the 2008 enactment specifies the notice requirements for a foreclosure action involving an owner-occupied, one-to-four-family dwelling. Along with the summons and complaint, the lender must also provide the borrower with a separate notice advising the borrower to contact an attorney or legal aid office, and advising the borrower that she may wish to obtain information on available options from a non-profit organization or government office.
Pre-Foreclosure Notice
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The 2008 enactment spells out pre-foreclosure action notice requirements for subprime, high-cost and nontraditional home loan borrowers. A lender must send the borrower a notice at least 90 days before the lender files a foreclosure action in court. The notice must inform the borrower that he is in danger of losing his home and advise the borrower that he may wish to seek help from a housing counselor to resolve the issue with the lender.
If a lender files a foreclosure action, the complaint must state that the plaintiff holds the mortgage or note on the property or has been given the authority to file the action, and that the lender has complied with the requirements of New York banking law. -
Settlement Conference
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The 2008 changes to the New York foreclosure laws state that in a residential foreclosure action, the court must schedule a settlement conference within 60 days of when the lender files proof that a copy of the complaint was sent to the borrower. If a borrower cannot afford a lawyer, the court may appoint one.
Foreclosure Sale
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In a judgment in a New York foreclosure action, the court will direct that the property be sold under the direction of the sheriff or a court-appointed referee. After the property has been sold, the officer who conducted the sale will issue a deed to the purchaser. The officer must file a report with the court within 30 days after completing the sale and transferring the property to the purchaser.
If the foreclosure sale proceeds are less than the amount owed by the borrower, the lender may file, within 90 days after the sale, a motion for a deficiency judgment against the borrower for the balance of the amount owed.
Foreclosure Rescue
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The 2008 enactment contains provisions aimed at protecting borrowers when they deal with foreclosure rescue consultants. The enactment bars a foreclosure rescue consultant from performing any services for a homeowner without a written agreement, or from accepting a fee from the owner until the agreed-upon services have been performed. The enactment also limits the authority of a consultant to exercise power of attorney on behalf of a homeowner.
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