If you’ve fallen on hard times and you’re worried about losing your New York home due to late payments, you can easily stop foreclosure within 14 days.
Today, we’ll explore how to stop a foreclosure in New York in more detail but remember this: taking action is key.
A situation with late payments doesn’t need to result in you losing your home. Far from it. Many people manage to stall or stop foreclosure and keep their homes.
In the event of any financial strain, it’s crucial not to bury your head in the sand as the situation will worsen.
There is hope if you take action, though.
If you haven’t yet missed any payments but you feel you might soon be late paying, contact your lender as soon as possible.
Mortgage lenders often allow 14 days as a grace period. This typically attracts a late payment penalty but nothing more. Check the promissory note for your mortgage for specifics. The terms and conditions will explain any grace period.
If you haven’t paid for longer than 14 days, your loan could become a delinquent loan.
Steps To Take Before Loan Delinquency
Federal law states that foreclosure proceedings cannot start until the debt becomes delinquent. In New York, loans become delinquent when 120 days have passed since your last payment.
This 120-day period should give you ample time to find ways to prevent foreclosure from happening.
All foreclosures in New York are judicial, meaning that the lender must file a foreclosure in court. In some other states, foreclosures are non-judicial, which means they don’t need to file with a court but must follow specific procedures.
How to Stop Foreclosure in NY
The moment you fall behind on payments, the best thing you can do is call your lender and explain your situation. Picking up the phone might feel like the last thing you want to do, but this is a case of saving your home not saving your pride.
Ignoring letters and pretending it’s not happening will only make it harder to hang on to your home.
You have three main options at this stage:
● Change the terms on your home loan
● Sell your home
● File a lawsuit against your lender
When you discuss solutions with your lender, this is called loss-mitigation. It means you can either sell your home to prevent getting into further debt or you could change the terms of your loan so you can get back on track.
It could be the case that your mortgage servicer is at fault. In this event, you should seek legal advice immediately as it could stop the foreclosure altogether.
If your mortgage provider has failed to follow the procedure, you have a strong chance of seeking the cancelation of the foreclosure. You’ll need to file a lawsuit to achieve this.
For example, New York foreclosures are judicial. This means lenders must send a pre-foreclosure letter to the borrower at least 90 days before the foreclosure process starts. If they fail to do this, then you have a robust chance of getting the foreclosure canceled. See below for more scenarios.
The Consumer Financial Protection Bureau (CFPB) rules that dual-tracking (1) is prohibited but what is this?
Dual tracking is where a mortgage servicer pursues foreclosure while simultaneously dealing with a loss-mitigation application. Mortgage servicers are required to fully review an application for loss-mitigation before they pursue the foreclosure process.
When you submit a loss-mitigation application, mortgage servicers should stall all foreclosure proceedings. Unfortunately, some unscrupulous companies sometimes still pursue foreclosure. If this happens, you can get the foreclosure canceled, and you could also file for damages.
Mistakes Crediting Your Payments
Your mortgage servicer is at fault if:
● They failed to apply credits to your mortgage correctly
● Escrow payments for property tax and insurance not made on time
● Late fees are incorrectly calculated
● Grace periods are ignored
While mortgage servicers are allowed to charge reasonable fees for late payment and foreclosure fees, it makes sense to double-check they aren’t charging you excessive, unnecessary fees making your loan more expensive. It would be wise to check with a lawyer.
Wrongly Applied for Force-Placed Insurance
If your home insurance lapses, your mortgage lenders must find emergency cover called force-placed insurance until you renew your policy. This emergency insurance will push up your payments.
If this is incorrectly applied, it could end up costing you over time. In this case, your mortgage servicer might be at fault.
It’s worth seeing a lawyer who can examine the documentation related to your mortgage to see if your mortgage servicer has employed abusive or unlawful practices. It could mean your foreclosure gets canceled.
Change Your Payment Terms
When you call your lender to discuss falling behind on payments, you might be able to change the terms of your loan so you can reduce your monthly payments.
If this is an approach you’d like to take, don’t delay. The longer you leave it, the more you'll owe, and more penalties you'll incur. The sooner you contact your lender, the better.
You can sometimes extend the terms of your mortgage or recalculate your payment plan. It’s worth seeking the help of a good defense lawyer who knows how to get you the most attractive terms possible.
Reinstatement is where you agree to pay the outstanding amount in full and any late payment fees incurred by a particular date. If you can find the money from somewhere, this solution can work well.
Some mortgages permit a period of forbearance where your mortgage servicer reduces or suspends payments allowing you to catch up. The forbearance time is added to the payment period.
If possible, try to find a lender who is prepared to refinance your current mortgage. Be careful about any new payment agreements, so you’re able to keep up with the payments.
If you’re unable to find a workaround to stay in your house, you might consider minimizing the amount of debt owed by selling up.
It will be painful to walk away, but it can sometimes be the least bad option in the long run. At this stage, the best loss mitigation approach possible is essential.
Sell Your Home
If you are facing no other option but to walk away from your home, you can try putting it on the market to see if you can achieve market value.
Short Sale Your Home
If you’ve been unable to sell your house at full market rate, your lender may allow you to sell your property for less than the amount you owe. The proceeds from the sale are used to repay a portion of the mortgage debt.
A short sale is better than a foreclosure. Also, relocation assistance is often available with short sales. It’s also easier to begin repairing your credit score than in the aftermath of a foreclosure, too. Foreclosures last for seven years on your credit score while evidence of a short sale appears for just two years.
Short sales can take around four months to complete. Unfortunately, it can take some time for some lenders to approve a sale.
The delay in approval can jeopardize selling the property as buyers are not always prepared to wait so long for the sale to be approved.
While short sales prevent foreclosure and damage to your credit score, you could end up with a deficiency judgment.
A deficiency judgment is a lien placed on the debtor by the court which means the lender still holds you responsible for the remaining balance owed after the short sale. When you pay the balance, the mortgage servicer lifts the lien.
In New York, there is no law to prevent deficiency judgment after a short sale. However, if the bank forgives a deficiency judgment, you may be liable for the tax.
If you are unable to make a short sale or sell your property, there are still other options available.
File for Bankruptcy
When you file for bankruptcy, the courts place a block on debts which stops creditors chasing you.
Depending on your circumstances, filing for bankruptcy could be a better option than foreclosure. There are two types of bankruptcy:
- Chapter 7 bankruptcy
- Chapter 13 bankruptcy
Chapter 7 debt wipes the debt completely while chapter 13 bankruptcy creditors are paid back with a repayment plan spanning 3 to 5 years.
Chapter 13 can be a better option as it functions somewhat like a consolidation loan and gives the borrower a chance to stay in their home if they keep up with payments.
Ask for a Deed in Lieu of Foreclosure
A deed in lieu of foreclosure (DIL) is when you give the deeds to your property to the mortgage lender and they sell the house.
This avenue is considered more favorable by borrowers and lenders. You don't have to be responsible for selling the home. Any penalties and interest are also canceled so you can walk away owing nothing.
Some lenders would waive any remaining debt if the property is sold for less than the amount you owe. However, New York law allows lenders to start legal proceedings to recover the remaining balance after the deed in lieu.
Ensure that a deficiency waiver is included in the deed in lieu, for peace of mind.
No Right of Redemption
In some states, it’s possible to buy your house back just after foreclosure. This is called the right of redemption.
Unfortunately, there’s no right of redemption in New York, so once the foreclosure is complete, there is no opportunity to get your home back. It is possible, however, to redeem before foreclosure if you can find a means to do so.
So, these are a few avenues available to stop a foreclosure. To fight mortgage lenders employing abusive practices, seek advice from a reliable foreclosure lawyer by calling the Fine Law Office at (800) 939-3819 or visit our contact page.