If you're a homeowner in New York facing the scary prospect of losing your home to foreclosure, read on to find out what to expect—from missing your first payment all the way to eviction—and learn about your rights during the process. (To learn what to do—and what not to do—in a foreclosure, see Foreclosure Do's and Don'ts.)

New York Mortgage Loans

When you take out a loan to purchase residential property in New York, you typically sign a promissory note and a mortgage. A promissory note is basically an IOU that contains the promise to repay the loan, as well as the terms for repayment. The mortgage provides security for the loan that is evidenced by a promissory note. (Find out more in our article What’s the Difference Between a Mortgage and a Promissory Note?)

What Happens When You Miss a Payment

If you miss a payment, most loans include a grace period of fifteen days or so, after which time the loan servicer will assess a late fee.

To find out the late charge amount and grace period for your loan, look at the promissory note that you signed. This information can also be found on your monthly mortgage statement. (Learn more about fees that the lender can charge if you’re late on mortgage payments.)

What Happens When You Fall Behind in a Few Payments

If you miss a few mortgage payments, your servicer will probably send a letter or two reminding you to get caught up, as well as call you to try to collect the payments. Don’t ignore the phone calls and letters. This is a good opportunity to discuss loss mitigation options and attempt to work out an agreement—like a loan modification, forbearance agreement, or repayment plan—so you can avoid foreclosure.

Preforeclosure Loss Mitigation Review Period

Under federal mortgage servicing rules that went into effect January 10, 2014, the servicer must generally wait until you are more than 120 days delinquent on payments before filing the case in court to start the foreclosure. This is to give you sufficient time to explore loss mitigation opportunities. (Learn more about when foreclosure can begin.)

Mortgage Contracts Often Require a Breach Letter

New York mortgages often contain a clause that requires the lender to send a notice, commonly called a breach letter or demand letter, informing you that your loan is in default before it can accelerate the loan and proceed with foreclosure. (The acceleration clause in the mortgage permits the lender to demand that the entire balance of the loan be repaid if the borrower defaults on the loan.)

The notice usually must specify:

• the default
• the action required to cure the default
• a date (usually not less than 30 days from the date the notice is given to the borrower) by which the default must be cured, and
• that failure to cure the default on or before the date specified in the notice may result in acceleration of the debt and sale of the property.

90-Day Notice

If the property is owner-occupied, New York law requires that 90 days before starting the foreclosure the lender or servicer send a notice to the borrower that provides, among other things:

• information about how to cure the default, and
• a list of government approved housing counseling agencies located near the homeowner.

The 90-day time period runs concurrently with the 120-day loss mitigation review period.

If the matter is not resolved within 90 days from the date the notice was mailed, the lender will begin the foreclosure. (The foreclosure can start sooner if the homeowner stops living in the dwelling so that it is no longer his or her primary residence.)

This notice requirement is in effect until January 14, 2020.

New York Foreclosure Process

In New York, foreclosures are judicial, which means the lender (the plaintiff) must file a lawsuit in state 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?)

How foreclosure begins. The lender initiates the foreclosure by filing a complaint with the court. The complaint is served (given) to the borrower, along with a summons that typically provides 20 days to file an answer (if the complaint and summons were served in person) or 30 days (if service was by mail or another way), as well as a "Help for Homeowners" notice advising the homeowner of his or her rights during the foreclosure process.

Settlement conference. For foreclosure actions involving borrower-occupied properties, 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. At the settlement conference, the lender and homeowner attempt to reach a mutually agreeable way to avoid foreclosure.

What's next? If you can't come to an agreement at the settlement conference and you don't respond to the court action within the specified amount of time, the lender can get a default judgment from the court. This means you automatically lose the case. On the other hand, if you file an answer, the lender can't obtain a default judgment. At this point, the lender will most likely file a motion for summary judgment. This type of motion requests that the court grant judgment in favor of the lender because there is no dispute as to the important facts of the case, the homeowner’s defense lacks merit, or does not prove wrongdoing. If summary judgment is denied, then a trial may occur. If the lender is granted summary judgment (or you lose at trial), the court will enter a final judgment of foreclosure against you.

Publication. A sale date is then set and published in a newspaper.

Reinstatement Before Sale

New York law provides that the homeowner may reinstate the loan at any time prior to final judgment. The homeowner can also pay the arrearage after judgment, but before the sale, and the proceedings will be stayed (postponed). If the homeowner subsequently defaults, then the court can order enforcement of the judgment.

The Foreclosure Sale

At the foreclosure sale, the property will be:

• sold to the highest third-party bidder, or
• sold to the foreclosing lender and become REO.

Most properties go to the foreclosing lender at the foreclosure sale.

Deficiency Judgments in New York

When a lender forecloses on a mortgage, the total debt owed by the borrower to the lender frequently exceeds the foreclosure sale price. The difference between the sale price and the total debt is called a “deficiency.” In some states, the lender can seek a personal judgment called a "deficiency judgment" against the debtor to recover the deficiency.

In New York, a deficiency judgment is allowed if a homeowner is personally served or appears in the lawsuit. The amount of the deficiency is the amount of the debt less the higher of:

• the fair market value, or
• the sales price.

Learn more about deficiency judgments in New York.

Redemption Period

A redemption period is the legal right of any mortgage borrower in foreclosure to pay off the total debt, including the principal balance, plus certain additional costs and interest, in order to reclaim the property.

In New York, there is no redemption period after the sale.

Eviction Following Foreclosure

If you don’t vacate the property following the foreclosure sale, the new owner will likely:

• offer you a cash-for-keys deal, or
• evict you. (The new owner must give the former owner a ten-day notice to leave.)

Talk to an Attorney

If you have questions about the foreclosure process in New York or want to learn about potential defenses to a foreclosure, consider talking to a foreclosure attorney. It’s also a good idea to talk to a HUD-approved housing counselor if you want to learn about different loss mitigation options.

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