New York Foreclosure Law: Waiting Period
In New York, the bank can initiate foreclosure proceedings after two to three months of missed payments. Lenders can foreclose on deeds, trusts or mortgages that are in default using a judicial or nonjudicial foreclosure process.
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New York Foreclosure Process
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If a borrower becomes delinquent on his mortgage, he can still retain his interest in the property during the redemption period, which lasts between two to three months. The borrower has several options: Make payments to bring his account current, seek a loan modification, sell the property as in a short sale, refinance with another lender or file bankruptcy. If the borrower fails to satisfy the mortgage, the redemption period ends and mortgage goes into foreclosure status. The borrower has up to 30 days to respond an "acceleration letter" from the bank. If the borrower fails to respond, the court issues a motion for judgment foreclosure and sale. If the borrower does respond the acceleration letter, the court sets a motion for summary judgment and a trial date. It the borrower loses at trial, the bank can foreclose on the property.
Judicial Vs. Nonjudicial Foreclosure
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In a judicial foreclosure, the lender must file a complaint against the borrower in the county where the property is located. Some states, such as Nevada, allow borrowers the right to redeem the property after the auction, but not in New York. A lender can initiate a nonjudicial foreclosure when there is a power of sale on the mortgage, deed or trust. A power of sale is a pre-authorization by the borrower that gives the lender the right to sell the property if the loan is in default. Lenders rarely initiate nonjudicial foreclosures in New York.
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Deficiency Judgment
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A borrower can still be on the hook if there is a balance remaining after the foreclosure sale. In New York, lenders can pursue a deficiency judgment, which gives them the right to pursue borrowers for remaining balances. It is at the lender's discretion whether it will pursue a deficiency judgment. There are tax consequences if the lender chooses to forgive the remaining balance.
Options
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A borrower has several options if he is facing foreclosure. The borrower can do a short sale by selling the property to a willing buyer for less than the mortgage amount. In this case, the borrower will still be responsible for the remaining balance through a deficiency judgment. Another option is seeking a loan modification. Finally, the borrower can file a bankruptcy petition, which provides him an automatic stay of protection from the mortgage lender. However, the borrower must reaffirm his mortgage, in which case he can seek to modify his loan payments. If approved, the borrower must resume making mortgage payments.
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