How long does Mortgage Foreclosure take in NYC?
An alarming number of my clients are going through foreclosure proceedings. The bank notices are often confusing and bank personnel are not helpful in explaining the situation. This leaves many people in the precarious position of not knowing what their options are and losing their ability to save their homes. My focus here is to explain the foreclosure process and to describe how bankruptcy may be helpful.
The Mortgage Foreclosure Process:
First, the mortgagor (person who owes money to the bank) misses a payment. Typically, after approximately two weeks the mortgage company will assess late fees on the loan. This is when the bank usually begins to contact the mortgagor.
Second, homeowners receive a pre-foreclosure notice or “90-day acceleration notice”. This notice details amounts needed to catch up on the mortgage and information regarding non-profit agencies that can help.
Next, after about 50 days a demand letter is sent out stating that the mortgage terms have been violated. The letter should state that there are 30 days to become current on the mortgage.
Finally, after 90 days from the missed payment the bank may begin the foreclosure action against you. Usually, the mortgagor will receive court papers called a summons and complaint with instructions on answering the charges brought by the bank. After the summons and complaint has been “served” on the mortgagor, the court will schedule a settlement conference so that, hopefully, both parties can resolve this issue without further proceedings. If the mortgagor does not respond to the summons and complaint the court may issue a default judgment against the mortgagor and allow a foreclosure sale to proceed. A notice of sale must be published in a local news publication for at least four weeks prior to the foreclosure sale.
Options to avoid Mortgage foreclosure:
Foreclosure defense is one option. Here, an attorney will challenge all aspects of the foreclosure proceedings. Often, among other things, the bank must prove that the mortgage note has been properly transferred to it (a “standing” challenge). This process typically stalls the foreclosure so that the mortgagor has time to get a mortgage modification or raise funds to become current with the mortgage. However, at the same time mortgage arrears continue to accumulate and the cost to become current increases. Similarly, attorney’s fees can be quite high during this process. Since in New York foreclosure defense often merely stalls the inevitable problem, I recommend this option only for people who do not intend to keep their home.
Another option is Chapter 7 or Chapter 13 Bankruptcy. In a Chapter 7 Bankruptcy the debtor (person filing) will not owe on the mortgage principal, regardless of the outcome. In addition, in New York City there are loss mitigation programs in the bankruptcy court, which assist the debtor in getting a mortgage modification. In my experience, when someone files for Chapter 7 Bankruptcy the bank is often much more helpful at facilitating a mortgage modification. However, there are no guarantees in a Chapter 7 Bankruptcy.
In a Chapter 13 Bankruptcy, the bank can be forced to accept mortgage arrears over a 3 or 5-year period. Essentially, this gives the debtor time to catch up on missed payments interest free. The debtor still needs to tender future mortgage payments to the bank but the arrears are divided up into manageable monthly payments. Often second and third mortgages can be dissolved in Chapter 13 Bankruptcy proceedings. This is a process called lien stripping.
If you property is in danger of being foreclosed on you should act quickly! The longer you wait the greater are your chances of losing your home.
If you are interested in a free consultation please contact my office at 212-244-2882 at anytime.