Foreclosure Process in New York
Bankruptcy lawyers are frequently visited by homeowners who have either (1) just received a Pre-Foreclosure Notice, or (2) just been served with a foreclosure Summons and Complaint. It is not unusual for their first question to be—how long before I will have to leave my house? You will be happy to learn that foreclosure is a long and drawn out process in New York, which often times can work to the homeowner's advantage. The following generic timetable will give you an idea of the many "hoops" that a foreclosing lender must jump through before you lose the right to remain in your house.
Although not required by New York or federal law, many mortgage documents require a lender to send a default notice to the homeowner within 30 days of missing a payment. New York law does require the lender to send the homeowner a Pre-Foreclosure Notice at least ninety (90) days before commencing a foreclosure. This Notice must contain certain information intended to assist the homeowner in the protection of their rights.
The foreclosure lawsuit is actually commenced by the lender serving upon the homeowner a Summons and Complaint and filing with the County Clerk's Office an Affidavit of Service thereof. If the homeowner is personally served with the Summons and Complaint they have twenty (20) days thereafter to serve upon the lender's attorney a responding pleading called an Answer. If service of the Summons and Complaint is effectuated upon the homeowner by any means other than personal delivery, the homeowner has thirty (30) days to serve and file their Answer.
Within sixty (60) days of the lender filing its Affidavit of Service, the Court must schedule a Mandatory Foreclosure Settlement Conference. This is an opportunity for the homeowner to meet face-to-face with the lender, or its representative, to try to reach an amicable resolution of the matter, such as a mortgage modification. The homeowner should appear and participate in these Settlement Conferences, which are frequently adjourned numerous times and re-scheduled for later dates. The foreclosure action is effectively stayed, or halted, until the Settlement Conference procedure is exhausted, which serves to lengthen the foreclosure process considerably.
If the Mandatory Foreclosure Settlement Conferences do not lead to a mortgage modification or other agreed upon result, the next stage in the foreclosure process is determined by whether or not the homeowner has filed an Answer. If an Answer has been filed, the lender will bring on a motion for summary judgment and argue that there are no real issues of fact to prevent the lender from getting Judgment. The homeowner has an opportunity to oppose this motion, but historically had very little ammunition to fight with, since they usually were behind in the mortgage payments. However, given the sloppiness of document handling in any case where Mortgage Electronic Registration Systems (MERS) was involved, a homeowner these days has many more arrows in its quiver, especially in the Second Department (where our office is located) due to the decision in Bank of New York v. Silverberg.
If the lender is granted summary judgment, the Court will issue an Order of Reference, wherein a Referee in foreclosure (the "Referee") is appointed to compute the amount actually due on the mortgage. This document is prepared by the lender's attorney and submitted to the Court, where it sits on the desk of either the Judge or his law clerk until such time as the Judge actually signs it. If no Answer is filed by the homeowner, the lender skips the summary judgment stage and goes directly to submitting the Order of Reference.
Once the Order of Reference is signed and filed with the Court, the Referee appointed by said Order will (1) receive and examine certain relevant foreclosure documents submitted by the lender to insure their regularity, and (2) determine the amount owed by the homeowner to the lender. The lender's attorney will prepare a Referee’s Oath and Report of Amount Due, to be signed by the Referee and then filed with the Court.
Once the Referee's Oath and Report of Amount Due is filed, the lender will move for a Judgment of Foreclosure and Sale, which is the document that gives the lender the right to sell the homeowner's property at auction.
Once the Judgment of Foreclosure and Sale is signed by the Judge and filed, the lender can move forward with the foreclosure auction sale. The lender must send to the homeowner a copy of the Notice of Sale, advising of the date and time of the auction sale, and publish said Notice of Sale once a week for four (4) consecutive weeks in a designated local newspaper. The foreclosure auction sale is conducted (usually in the lobby of the Court) not less that 28 nor more that 35 days after the first publication date of the Notice of Sale.
At the foreclosure auction sale the lender will appear and generally put in a bid in an amount equal to the balance due on the mortgage. Lenders will rarely bid higher than the amount owed because lenders do not want to own and manage real estate portfolios—they want money. In good economic times real estate developers and/or speculators may also appear and bid if a good deal can be had, which can occur if the property is worth substantially more than the amount bid by the lender. In any event, when the bidding is concluded at the auction sale either (1) the lender is the highest bidder and "takes back" the property, or (2) a third party is the highest bidder and becomes the owner once the bid amount is paid to the Referee. The homeowner no longer owns the property once the "gavel goes down" and bidding is concluded at the auction sale. However, if the homeowner files either a Chapter 7 or Chapter 13 bankruptcy at any time prior to this point (even if filed earlier the same day), the automatic stay created by said bankruptcy filing will immediately stop the foreclosure process. Of course, only a Chapter 13 filing is designed to provide long term relief to the homeowner by affording an opportunity to catch up on the past due mortgage payments. However, once the auction sale is concluded the house is "lost" and a subsequent bankruptcy filing of any type will not undo or change this fact, since homeowners do not have a right of redemption in New York foreclosures.
If the former homeowner remains in possession of the premises as a holdover tenant after the auction sale, the new owner (usually the lender) must jump through a few more "hoops" before it actually can take possession of the premises. To obtain such possession, the new owner will serve upon the tenant a Ten Day Notice to Quit Premises. If the holdover tenant does not voluntarily vacate the premises during this period, the new owner will thereafter serve eviction papers upon the tenant seeking to obtain a Judgment of Possession and Warrant of Eviction from the local municipal court having jurisdiction over the property. The court hearing on the eviction is held very quickly (ie., not less than 5 nor more than 12 days) after the eviction papers are served on the tenant.
If the new owner is awarded a Judgment for Possession and a Warrant of Eviction by the local judge, the Sheriff or City Marshall will thereafter serve the Warrant of Eviction on the holdover tenant, giving said tenant 72 hours to vacate voluntarily. If the tenant remains after said period, the Sheriff will return and supervise the physical removal of the tenant and their belongings from the premises.
If the foregoing process seems extraordinarily cumbersome and lengthy I am sure most lenders would agree with you. It is the nature of the process that gives rise to the many stories heard about people still remaining in their house for a year or more after the foreclosure has started, and the advent of the Mandatory Settlement Conferences has just served to make an already lengthy process even longer.
Middletown, New York 10940 
