The New York Foreclosure Process
The New York Foreclosure Process
Judicial foreclosure (foreclosure by lawsuit) is the primary method of foreclosure in New York. Although non-judicial foreclosure is available, it is seldom used. Non-judicial foreclosure procedures are so complicated that they often lead to title disputes. Such problems might make it very difficult to evict a tenant. Junior lien holders might also dispute the title and tie the matter up in litigation. Thus most lenders will elect a judicial foreclosure.
The Lis Pendens
Judicial foreclosure begins when the lender files a lawsuit. The lender will sue the borrower and any person who has a claim to the ownership or a possession interest. The lender, as plaintiff, has a summons and a complaint served on the borrower. The summons commands the borrower to come to court and answer the lender's complaint. This complaint describes the lender's legal and factual basis for foreclosure.
A notice of Lis Pendens must be filed. The Lis Pendens is a notice that a lawsuit is pending, the outcome of which affects title. (You may access all the newly recorded Lis Pendens properties in the Nine (9) Major Metropolitan New York counties when you become an Active Member. Click here for more information.)
Often, the borrower fails to answer. In that event, the court will appoint a referee to compute a figure for the foreclosure. The court may then sign a judgment of foreclosure and sale. If the borrower appears and defends against the lawsuit, then the court will determine the merits of the defense. The referee will need an oral hearing. If the lender wins, then a judgment of foreclosure and sale will be awarded.
The Foreclosure Sale (Auction)
On average, it takes 12-18 months after a Lis Pendens has been filed for a foreclosure action to move through the court system and the property to end up on the auction block. During this time you can contact the homeowner directly to acquire the property.
Typically the foreclosure sale is advertised for 4 to 6 weeks. The sale is made by public auction to the highest bidder. (You may access all the upcoming Foreclosure auction properties in the Nine (9) Major Metropolitan New York counties when you become an Active Member. Click here for more information.)
At the auction, the successfully bidder is required to make a 10% down payment (usually in a certified check made payable to the referee) and must close within 30 days. Should the successful bidder fail to close within 30 days they forfeit their 10% down payment.
The lender may bid, as well. The lender must distribute the proceeds according to the terms of the judgment signed by the judge. The referee will normally hold any surplus money.
After the Foreclosure Sale (Auction)
If no one at the auction bids the lender's upset price (also known as minimum bid) the property reverts back to the lender. The referee executes a deed conveying ownership of the property back to the lender. The property then becomes part of the lender's inventory of homes, and is referred to as an R.E.O. (Real Estate Owned). Most lenders then farm their inventory of homes out to local real estate brokers for sale. Click here to gain access to all R.E.O. properties in your area.
Deficiency
If the mortgage contains an express covenant to pay, then the lender may seek a deficiency judgment against the borrower if the court ordered sale does not produce sufficient funds. The lender can ask the court for a deficiency judgment for the amount left unpaid after the foreclosure sale. The motion for the deficiency judgment must be made within 90 days after the foreclosure sale. The court must determine the market value and credit the greater of the market value or the foreclosure sales price against what remains unpaid on the loan.
Redemption
After the judicial foreclosure, there is no redemption period. This is true of non-judicial foreclosure, as well.
State Law Links:
STATE LAWS:
Judicial foreclosure (foreclosure by lawsuit) is the primary method of foreclosure in New York. Although non-judicial foreclosure is available, it is seldom used. Non-judicial foreclosure procedures are so complicated that they often lead to title disputes. Such problems might make it very difficult to evict a tenant. Junior lien holders might also dispute the title and tie the matter up in litigation. Thus most lenders will elect a judicial foreclosure.
The Lis Pendens
Judicial foreclosure begins when the lender files a lawsuit. The lender will sue the borrower and any person who has a claim to the ownership or a possession interest. The lender, as plaintiff, has a summons and a complaint served on the borrower. The summons commands the borrower to come to court and answer the lender's complaint. This complaint describes the lender's legal and factual basis for foreclosure.
A notice of Lis Pendens must be filed. The Lis Pendens is a notice that a lawsuit is pending, the outcome of which affects title. (You may access all the newly recorded Lis Pendens properties in the Nine (9) Major Metropolitan New York counties when you become an Active Member. Click here for more information.)
Often, the borrower fails to answer. In that event, the court will appoint a referee to compute a figure for the foreclosure. The court may then sign a judgment of foreclosure and sale. If the borrower appears and defends against the lawsuit, then the court will determine the merits of the defense. The referee will need an oral hearing. If the lender wins, then a judgment of foreclosure and sale will be awarded.
The Foreclosure Sale (Auction)
On average, it takes 12-18 months after a Lis Pendens has been filed for a foreclosure action to move through the court system and the property to end up on the auction block. During this time you can contact the homeowner directly to acquire the property.
Typically the foreclosure sale is advertised for 4 to 6 weeks. The sale is made by public auction to the highest bidder. (You may access all the upcoming Foreclosure auction properties in the Nine (9) Major Metropolitan New York counties when you become an Active Member. Click here for more information.)
At the auction, the successfully bidder is required to make a 10% down payment (usually in a certified check made payable to the referee) and must close within 30 days. Should the successful bidder fail to close within 30 days they forfeit their 10% down payment.
The lender may bid, as well. The lender must distribute the proceeds according to the terms of the judgment signed by the judge. The referee will normally hold any surplus money.
After the Foreclosure Sale (Auction)
If no one at the auction bids the lender's upset price (also known as minimum bid) the property reverts back to the lender. The referee executes a deed conveying ownership of the property back to the lender. The property then becomes part of the lender's inventory of homes, and is referred to as an R.E.O. (Real Estate Owned). Most lenders then farm their inventory of homes out to local real estate brokers for sale. Click here to gain access to all R.E.O. properties in your area.
Deficiency
If the mortgage contains an express covenant to pay, then the lender may seek a deficiency judgment against the borrower if the court ordered sale does not produce sufficient funds. The lender can ask the court for a deficiency judgment for the amount left unpaid after the foreclosure sale. The motion for the deficiency judgment must be made within 90 days after the foreclosure sale. The court must determine the market value and credit the greater of the market value or the foreclosure sales price against what remains unpaid on the loan.
Redemption
After the judicial foreclosure, there is no redemption period. This is true of non-judicial foreclosure, as well.
State Law Links:
STATE LAWS:
- Action to Foreclose a MortgageArticle 13; Real Property Actions and Proceedings Law
- Foreclosure of Mortgage by AdvertisementArticle 14; Real Property Actions and Proceedings Law
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