Many states have mediation programs to assist borrowers in finding ways to avoid foreclosure. New York has implemented a program where borrowers attend a face-to-face meeting with their lender at what's called a foreclosure "settlement conference." Read on to learn more about how New York’s settlement conference program works and how you might be able to benefit from the process.

(For more articles on New York foreclosure law and assistance for New York homeowners facing foreclosure, visit our New York Foreclosure Law Center.)

What's a Foreclosure Settlement Conference?

A foreclosure settlement conference is a meeting with your lender’s representative and someone from the court, like a judge, court referee, or court attorney. The settlement conference provides an opportunity to work out a deal with your lender before the foreclosure is completed.

At the settlement conference, the parties discuss your financial situation and try to negotiate a way for you to keep the home or give up the property without going through a foreclosure. By working together, the parties are often able to reach an agreement.

Potential outcomes of a settlement conference include a:

• loan modification
• forbearance agreement
• short sale, or
• deed in lieu of foreclosure.

New York Foreclosures

In New York, foreclosures are judicial, which means the lender must foreclose through the state court system. The lender initiates the foreclosure by filing a complaint and having it served on the borrower, along with a summons to appear in court. (To learn more about the difference between judicial and nonjudicial foreclosure, and the procedures for each, see Will Your Foreclosure Take Place In or Out of Court?)

To learn about the specific foreclosure laws and procedures in New York, see New York Forclosure Laws and Procedures.

New York Foreclosure Settlement Conferences

New York law requires the court to hold a mandatory settlement conference within 60 days of the filing of the proof of service with the court clerk. (N.Y. Civ. Prac. Laws & Rules, Rule 3408).

Eligibility for a Settlement Conference

Homeowners in danger of foreclosure are entitled to participate in a court settlement conference with their lender if the property is:

• residential
• borrower-occupied, and
• a one to four unit family dwelling or condominium.

Notice of Settlement Conference

The court will send a notice to the parties advising them of:

• the time and place of the settlement conference
• the purpose of the conference, and
• the documents that they should bring to the conference.

The Settlement Conference

At the settlement conference, the court will:

• discuss the rights and obligations of the parties
• determine whether the parties can reach a resolution to avoid foreclosure, and
• evaluate workout options (such as a payment schedule or loan modification).

Both the lender and borrower are required to negotiate in good faith to reach a mutually agreeable way to avoid foreclosure. (For more information on settlement conferences in New York, go to the New York State Unified Court System website.)

When the Settlement Conference Law Expires

The settlement conference requirement will sunset (expire) on February 13, 2020, unless extended by another statute. At that time, the law requiring a settlement conference will apply to only high-cost home loans taken out between January 1, 2003 and September 1, 2008, as well as some subprime and nontraditional loans.

Should You Participate in a Foreclosure Settlement Conference?

Even though participating in a New York foreclosure settlement conference doesn't guarantee that you can avoid foreclosure, it won't hurt to participate. The lender might be more likely to agree to a nonforeclosure solution at the settlement conference than if you approach it outside of the program. Or you might qualify for a loss mitigation option that you hadn’t previously considered.

Talk to an Attorney

Hiring a lawyer to represent you at a settlement conference is often a good idea. A lawyer can help you prepare for your settlement conference, assist with the negotiation process, protect your legal rights in the foreclosure process, and advise you about potential defenses to the foreclosure. You might also consider consulting with a HUD-approved housing counselor to learn more about potential foreclosure avoidance options.