The threat of foreclosure is understandably terrifying to any homeowner, especially if you have already spent years paying off the mortgage on your house. A significant part of that fear comes from not understanding what happens when a bank or other mortgage holder forecloses on a home. So what exactly does a foreclosure entail, and how can you protect yourself from being foreclosed on?
Before the Foreclosure
In New York, foreclosure is a fairly lengthy process, and one that technically starts even before a bank or mortgage holder formally files for foreclosure. This is because a mortgage holder cannot even begin the process until a mortgagee is at least 120 days late on their mortgage payments. After that, they are also legally required to send a 90-day pre-foreclosure notice before they can even begin the foreclosure. This pre-foreclosure notice also must come with a list of government-approved financial counseling services, who may be able to help you to deal with your financial issues.
In addition, some mortgages require the mortgage holder to send an “acceleration letter,” also known as a breach letter. This letter informs the mortgagee that they are in violation of their mortgage agreement due to non-payment, and if they do not cure the breach by paying the amount owed within 30 days, foreclosure proceedings will begin. This, along with the other legally required measures, give mortgagees an opportunity to pay back what they owe on their mortgage before facing the possibility of foreclosure.
Once the Foreclosure Has Begun
The foreclosure process starts once a mortgage holder has completed all the prerequisite steps, and they finally file for foreclosure in court. Once they file, they must furnish you with a formal summons through service of process, and file an affidavit of service to the court. After that, you have up to 30 days to answer the summons, which typically means obtaining legal counsel to help you with the legal aspects of the case.
Once this initial process is done, there is a mandatory settlement conferencing period, which must begin within 60 days of the affidavit of service being filed. This settlement conference is arguably the most important part of the foreclosure process, where both sides meet to try to come to an agreement on how to handle the loan. This may include negotiating an agreement to modify the terms of the mortgage, or it may include refinancing the property or agreeing to a short sale.
It is only if both sides cannot come to some kind of settlement that the foreclosure proceeds to discovery and, potentially, a trial. If there is no settlement before a judgment is issued in a trial, the house will be foreclosed on and it will proceed to sale. It should be noted that at any point before the final sale, a mortgagee may still cure the mortgage by repaying what is owed. Once the sale has been completed, however, it is too late.
Defending Yourself Against Foreclosure
This is only a basic outline of the foreclosure process. There are plenty of ways you may be able to delay or prevent foreclosure, depending on the terms of your mortgage agreement and your own personal circumstances. The only way to be certain, however, is to get an attorney with experience in handling foreclosure cases.
At David J. Lorber & Associates, PLLC, we assist clients throughout New York who are at risk of losing their homes to foreclosure. We will explain your options and guide you in making the best decision for your circumstances. Call us at (631) 750-0900 or contact us online to schedule your Free consultation at our Setauket office.