What to Do if a Foreclosure Action is Commenced Against You in New York
If you are served with a summons and complaint in a foreclosure action, do not ignore it. This is the most common mistake that homeowners make. If you are served personally, i.e., the summons is handed to you (within New York State), then it must be answered within 20 days of service. If served by alternate means, e.g., left on your door or served on someone else in your household, then you will have at least 40 days in which you can answer. If you are served by personal delivery outside of New York State, you will have thirty days from the date of service to answer.
It is critical that the answer must be prepared properly. All potential defenses and counterclaims must be asserted in the answer. Failure to do so may result in a waiver of those defenses and counterclaims. In order to protect your legal rights, you should retain an attorney experienced in foreclosure defense to answer the complaint. One of the most important defenses to assert in a foreclosure action is known as “lack of standing.” This defense should always be asserted when a trust, loan servicer or a bank other than the original lender is named as the plaintiff in the foreclosure action. Mortgages and the accompanying promissory notes are routinely transferred between various entities, often without following the proper procedures. The plaintiff in a foreclosure action must prove that it was the owner of the promissory note and mortgage at the time that the foreclosure action was commenced. If it was not the proper owner, then it cannot maintain the foreclosure action. A recent addition to the Real Property Actions and Proceedings Law (Sec. 1302-a), effective in 2019, provides that the defense of lack of standing is not waived if it was not asserted in an answer or pre-answer motion to dismiss. However, it is important to note that this law does not apply to defendants that default in answering the complaint.
It is important to review the original loan documents and closing statement to determine if there are any violations of law that may be asserted in defense of the foreclosure action. This is especially important with subprime loans and refinancing loans. Possible defenses include violations of the federal Truth in Lending Act; federal Real Estate Settlement Procedures Act; New York Real Property Actions and Proceedings Law; and the New York Banking Law.
Failure to answer the foreclosure complaint will most likely result in a default judgment granting the bank the right to sell your home (see below for an exception to this rule). Although the foreclosure process is lengthy, the bank will eventually be able to sell your house at a foreclosure sale.
The Foreclosure Process In New York
In all foreclosure actions of New York involving a one to four family residential property where the defendant resides at the property, a settlement conference must be held. The court schedules the conference, which is to be held within 60 days of the date of filing of the "Request for Judicial Intervention" by the plaintiff. A defendant who appears at the conference (either in person or by an attorney) will have thirty days from the date of the conference to serve an answer to the foreclosure complaint. However, defendants who do not appear at the conference are not afforded this opportunity. Thus, if you have not answered the foreclosure complaint when it was initially served, you will have a second opportunity to do so if you appear at the foreclosure conference. It is very important to remember that the foreclosure settlement conference is not available to defendants who do not reside at the property being foreclosed on.
The purpose of the settlement conference is to attempt to resolve the foreclosure action by means of a mortgage modification. It usually takes several conferences before a mortgage modification is offered to the homeowner, assuming the homeowner qualifies for one. If the homeowner does not qualify for a modification, the foreclosure process will continue. The next step in the process is for the bank to ask the court for a judgment entitling it to proceed with the foreclosure and for the appointment of a referee to determine the amount due. If the homeowner had answered the complaint (see above), the bank must move for summary judgment. The homeowner will then have an opportunity to respond to the proof that the bank has set forth in its request for a judgment.
If a judgment is granted, a referee is appointed to determine the amount owed. Once this amount is determined, the bank must bring a second motion asking the court to have the referee’s report confirmed and for permission to sell the property.
Once the court approves the sale of the property, the bank must advertise the sale in a newspaper designated by the court, at least once per week for four consecutive weeks, or twice per week for three consecutive weeks. In Suffolk County, the foreclosure sale is held at the town hall where the property is located. In Nassau County, the foreclosure sale is held at the Supreme Cout in Mineola.
The entire foreclosure process from start to finish takes a minimum of several months and is usually much longer. Due to the high rate of foreclosures in New York state, the process has slowed down even further. Therefore, you should not be concerned about being forced out of your home shortly after receiving a summons. However, as detailed above, you must not ignore the summons.
Mortgage Modification May Be an Option for You
The purpose of a mortgage modification is to allow a homeowner to remain in their home by modifying the terms of the mortgage. This may involve a combination of reducing the interest rate, extending the term of the loan and capitalizing any arrears (i.e. adding the arrears to the remaining principal balance).
My office can assist you in the mortgage modification process. It is important that the application for a loan modificaitno be prepared correctly, and that all requested financial documents are provided to the lender. You must be persistent and patient. You must show that there is sufficient income in the household to afford the proposed modified mortgage payments. Household income includes income of non-borrower spouses, adult children, and other adult relatives living at the property. It will also include any rental income that you are receiving. All income must be documented – “off the books” income cannot be used to satisfy the income requirements.
Be wary of companies that charge thousands of dollars to obtain a mortgage modification for you. In New York state, individuals and companies offering such services, who are not attorneys, are prohibited from accepting payment before the full completion of the services (NY Real Property Law sec. 265-b).
If you are in default on your mortgage or are in danger of defaulting, it is imperative that you contact the mortgage lender or servicer to determine if you are eligible for a loan modification. The longer that you are in default, the more difficult it will become to modify your mortgage, as the balance to be repaid will grow larger every month.
Chapter 13 Bankruptcy is an Option for Homeowners in Default
For homeowners who have defaulted on their mortgage, a Chapter 13 bankruptcy can be one of the most powerful options available. First, upon filing a bankruptcy proceeding, an automatic stay goes into effect immediately. The stay will stop any scheduled foreclosure sale of the debtor's property (with certain exceptions for people who have filed multiple bankruptcy cases).
A Chapter 13 bankruptcy allows homeowners to repay their mortgage arrears over a period of up to five years. The debtor must have sufficient household income to repay the mortgage arrears and make the current mortgage payments at the same time. Filing a Chapter 13 bankruptcy to repay mortgage arrears is most suitable for people who fell behind on their mortgage due to a temporary reduction in income. In Chapter 13, the debtor proposes a plan to repay the mortgage arrears, as well as other debts that the debtor may owe, including unsecured loans, credit cards and taxes. Once the plan is confirmed, i.e. approved by the bankruptcy court, all creditors are bound by the terms of the plan. Read more about Chapter 13 bankruptcy here.
Call Today for Help with Foreclosure in New York
You can save your home. Andrew M. Doktofsky is a highly experienced attorney who can assist you with foreclosure and mortgage defaults. Call (631) 673-9600, or submit the contact form below, for a free consultation regarding cases in Suffolk County, Nassau County, or New York City.
Andrew M. Doktofsky P.C. is a debt relief agency. I help people file for bankruptcy relief under the Bankruptcy Code.