Bankruptcy and General Practice

Foreclosure Info

Frequently Asked Questions: Foreclosure

Mortgage foreclosure is a complicated process, and it is normal to have questions. Here is a list of common questions about New York foreclosure law, and some general answers. For more information about preparing a foreclosure defense, call Selby Legal at (845) 419-3383 for a free consultation.

1. What is mortgage foreclosure?

Foreclosure is the legal process through which a lender with money secured by a home loan forecloses the interest of the homeowner to satisfy the mortgage, allowing the building to be sold at auction. The process is usually not started until a borrower is at least three months behind on paying the money back. Once a foreclosure is completed, a new deed is prepared giving title to the home to the bank, or whoever purchased the property at the auction.

2. What happens during a New York foreclosure?

Before a foreclosure action is commenced, representatives from the lender (or the institution which now holds the loan) will try making contact with a delinquent borrower with phone calls, emails, or letters, in order to try to get the loan brought current. The first formal step toward foreclosure is to send out what’s called an “acceleration letter.” This letter is official notice that the the loan is being accelerated, meaning that the entire balance is going to come due on a certain date. Unless the whole loan is paid in full by that date, an attorney for the bank will prepare the first legal documents to be delivered to you by a process server. Once those documents (a summons, and a complaint) are in hand, you will have as little as 20 days to file a response, or your home may be taken away by court order without you having another chance to mount a defense.

Once a judge has reviewed pleadings from both sides (or only from the bank, if you did not file an answer to the complaint), a determination will be made as to whether the debt is valid. Without an attorney representing you, it is likely that this will occur, and then the judge will appoint an independent person called a “referee” to hold an auction and sell the property to the highest bidder. The lender gets to bid up to the amount owed (which includes the legal fees for the foreclosure itself), and a deed giving the house over to the bank is executed unless someone else shows up and bids more. In either case, once a foreclosure is complete you will no longer own your home.

Hiring Selby Legal, PLLC to provide a foreclosure defense means that an answer will be filed, forcing the bank’s attorneys to provide proof that all the laws around mortgage foreclosure were followed to the letter. During our consultation process, we will develop a plan of action to help you avoid the consequences of having a foreclosure in your credit report.

3. How far behind in my payments must I be for a foreclosure to be started to take my home away?

Unless you’re at least three months behind, it’s unusual for a foreclosure to be commenced, but if you are struggling to keep up with the payments then there is no reason to wait until you’re served with foreclosure papers to contact Selby Legal, PLLC. During a free consultation we can discuss options to avoid a foreclosure entirely, or if that’s not possible we can develop a defense strategy that best fits your personal circumstances.

4. What should I do if I am served with foreclosure papers?

Contact us right away. Once you’ve gotten those papers, you will have as little as 20 days to file an answer. If that doesn’t happen, a judge may find that you have defaulted, which can end your chance to save your home.

5. How can I stop a foreclosure?

There are several strategies to stop your lender from foreclosing on your house, and we can discuss which best fit your situation during a free consultation. We may be able to negotiate a reinstatement agreement to bring the loan current, or a loan modification to change the payment terms. If we agree that it makes more sense not to keep the home, then a short sale or a deed in lieu of foreclosure may be the best alternative. At any point in the process, filing for bankruptcy will temporarily halt a foreclosure action by imposing an automatic stay on all debt-collection efforts, including mortgage foreclosure.

Retaining Selby Legal, PLLC to defend your interests in a foreclosure proceeding also means having an expert pore over the legal papers with which you’ve been served. Lenders sometimes lose important original documents, omit steps in the legal process, or make other mistakes which can be used to get foreclosure cases dismissed. If errors were made, you won’t benefit unless an experienced foreclosure defense attorney points them out.

6. What will foreclosure do to my credit rating?

Credit scores and credit ratings get damaged as soon as you are 30 days late with a mortgage payment, and a complete foreclosure can drop a credit score 200 points or more. Worse yet, a foreclosure appears as a negative on your credit report for seven years after it’s completed. That means interest rates which are one or two percentage points (up to 200 basis points) higher on any loan you take out during that time. This can cost you thousands of dollars in higher borrowing costs and missed opportunities.

7. What will happen to my house?

If a foreclosure is completed against you, the judge will order your home be sold at auction to pay the lender back. An appointed referee will sell it to the highest bidder, and if no one bids the house is deeded to the lender instead. In either case, you will no longer own your home.

8. Will I be kicked out after a foreclosure?

The new owner has the right to bring an eviction against you after foreclosure, or anyone else who lives in the home. This is a separate court case, and if you are served with eviction papers after foreclosure you should contact us to discuss a vigorous defense, which can buy valuable time as you consider housing options.

9. If my home is foreclosed, does that clear my debt to the bank?

Not necessarily. Unless the house was sold at auction for more than you owed your lender, a “deficiency judgment” can be entered against you for the difference, putting another negative mark on your credit reports. However, this kind of judgment can be discharged in bankruptcy.

Remember: the law often changes and each case is different. The above is meant to give you general information and is not legal advice.You should contact a foreclosure defense attorney to obtain answers regarding your specific situation. If you have been served with foreclosure papers, do not delay in contacting an attorney.

Have more questions? Selby Legal can properly advise you about filing bankruptcy. Contact us today to arrange a free consultation. (845) 419-3383