4 years ago

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The step by step guide to the foreclosure process in New York. Number 1, the bank sends an initial notice of default. After the borrower misses mortgage payments the lender will send an initial default notice by mail notifying the borrower that he or she is behind on payments and that the borrower has a certain amount of time to become current on payments, for example 30 days. Number 2, the bank mails you a 90-day pre-foreclosure notice. If you don't bring your loan current then the bank will send you a 90-day notice of default by mail with an intent to accelerate the debt and call in the full amount of the loan. The notice itself will need to be on colored paper for example blue versus plain white, that clearly separated from the other papers in the package and it will have big bold letters stating that this is a 90-day notice.

Essentially, the lender is required to mail you this package at least 90 days before starting a court case against you as the borrower and this package will also contain information on how to get help. Number 3, the bank files a Lis pendens on the property. At this stage the foreclosure case officially starts and the lender will kick off the legal proceedings by filing a Lis pendens on the property. Technically, it’s on the BBL number of the property at the county clerk's office. The lis pendens is essentially legal lease for a document of public record that states there is a controversy surrounding the property. Note that this controversy doesn't have to be a mortgage or mortgage related. There could be a Lis pendens for a mechanic's lien or some other breach of contract claim.

The bank files a summons and complaint and serves the borrower. In this next step and concurrently with the Lis pendens filing. The bank will also file a summons and complaint with the court against the borrower. The summons is essentially explains that the lender is filing a lawsuit against the borrower and the complaint details the basis for the filing. For example, the borrower hasn't paid the mortgage, lender has the right to collect payment and attends to foreclosing the property in order to do so, etc. Banks will typically serve the borrower with a summons and complaint in person versus by mail due to the liberal nature of courts in New York. Otherwise, borrowers could very easily claim in the eleventh hour that they never received the summons and complaint by mail. And you know what, Judges will usually buy this story in New York. Note however that this is the only time I will come by as something that will be served by hand versus by mail, all other notices will be sent by mail.

An answer to the complaint is due to the borrower. An answer to the complaint is due in 20 days if the borrower was served in person or 30 days if the borrower was served by mail. The answer should tell the borrower's side of the story and should include not only the borrower's defense to the claims but also any claims that perhaps the borrower has against the lender.

Mandatory settlement conference. In New York, regardless of whether the borrower actually responds to the complaint a mandatory settlement conference will be scheduled no matter what to get the parties together to see if they can work something out to avoid a foreclosure. As long as the borrower attends the settlement conference and gives the most even basic of answers, he or she will have another 30 days. One lawyer who specializes in foreclosures in New York told us recently that theoretically borrowers could go back to mandatory settlement conferences 10 or 11 times if they aren't able to make an agreement with the lender to modify the loan. Keep in mind that during all of this time everything is stopped until a determination can be made on whether a loan modification might be agreeable.

This could go on for a couple of years and often time the bank will simply give up and agree to a favorable loan modification. Remember that the courts in New York tend to be so liberal that they'd allowed borrowers with no income to keep coming back to court to delay the process. Why? Well, because the extremely liberal courts in New York ultimately can simply don't want foreclosures to happen.

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