What is a foreclosure?

large family home

What is a Foreclosure?

A Foreclosure lawsuit is the legal process by which your mortgage lender seeks a Court Judgment to sell your home when you have defaulted on your mortgage payments.

New York State is a “Judicial Foreclosure State”.  This means that the mortgage lender, unlike in other states, can only foreclose or sell your home by completing a judicial process.  In NY State, the judicial process takes the form of having a Judge determine whether the bank actually owns the mortgage, whether the mortgage has not been paid, and whether the bank is entitled to a Judgment of Foreclosure, which will allow it to auction the property and apply the funds in settlement of the mortgage payments.  In NY, the bank must also appoint an independent “Referee” to review the bank’s computations and determine the exact amount of the mortgage debt plus legal fees and costs of the foreclosure action and auction.

The current law in NY forces the bank to engage in some form of Court-supervised loan modification process once the Foreclosure action is filed in the Court.  However, the Court has no authority to force the bank to approve a loan modification.  If a loan modification is approved, the Foreclosure action is dismissed.  If the negotiations fail, then the bank is able to proceed with the Foreclosure action.

Many homeowners choose to represent themselves in Court during a Foreclosure action.  If they receive a loan modification, then the action is dismissed and no attorney is necessary.  However, in the event the loan modification fails, then many homeowners without an attorney find that they have given up very important rights to challenge the Bank’s ownership of the loan, whether the Bank properly served the foreclosure papers, or whether the Bank even complied with new NY State and Federal requirements before the lawsuit was even commenced.  Without an attorney defending the lawsuit and “pushing back” the bank’s attempt to foreclose, a typical foreclosure action in New York State can now take as little as 6 months to complete (as opposed to 1-3 years during the economic crisis).

As always, please feel free to contact me for a free consultation regarding your specific financial circumstances.