Reviewed by R. Spencer Lauterbach, Esq.

Quick Summary: Avoiding Foreclosure in NY

  • Foreclosure Defense: An attorney can file a formal answer, raise counterclaims, or serve motions to dismiss the lender’s lawsuit.
  • Loan Modification: New York requires a Foreclosure Settlement Conference where you can apply to permanently lower your interest rate and monthly payments.
  • Bankruptcy: Filing triggers an immediate Automatic Stay that halts the foreclosure process and allows you to enter court-supervised loss mitigation.
  • Short Sale: Selling the property for less than the remaining mortgage balance satisfies the debt if approved by the lender, shielding your credit from a full foreclosure.

Owning a home in New York is something to be proud of. People work so hard to be able to get to this point that the prospect of losing this asset can be devastating. Unfortunately, when times are tough, it may be hard to continue making mortgage payments. When a homeowner is unable to continue making mortgage payments, they may be subject to foreclosure.

Understanding Foreclosure Defense

When a mortgage lender sues a homeowner because they are unable to make mortgage payments, it is important for the homeowner to discuss foreclosure defenses with an experienced attorney. An experienced foreclosure defense attorney can assist the homeowner in the following areas:

  • Serving an answer
  • Defending against the foreclosure
  • Asserting counterclaims that aim to assert their right to the mortgage
  • Requesting all mortgage documents, including payment history and chain of title, among others
  • Serve motions and across motions that can have the action dismissed
  • Attempt to get the debtor into a loan modification program, which restructures the mortgage payment and may even lower the interest rate and monthly payment

Navigating the Foreclosure Settlement Conference and Loan Modification

In New York, foreclosure lawsuits that pertain to a residential property require the parties involved to enter into the Foreclosure Settlement Conference. Only then may the homeowners apply for a loan modification, in which the bank will review the homeowner’s ability to determine if the homeowner qualifies for a government loan modification program or a loan provided by the bank.

What is a Loan Modification?

Essentially, when you request a loan modification, a number of things can occur, including:

  • Lowered interest rates
  • Extended loan terms
  • Lowered monthly payment

If you are approved for the modification and all goes according to plan under the guidance of an experienced attorney, the end result should be the dismissal of the foreclosure action.

Filing for Bankruptcy to Stop Foreclosure

If an individual files for bankruptcy, the foreclosure process will be stopped immediately.

When you declare bankruptcy, an automatic stay is immediately issued, which puts an immediate stop on creditor action to seek debt. You are eligible to file for bankruptcy at any point before the house is sold.

It is important to understand, however, that bankruptcy can have a considerable impact on your credit and finances, so the decision to file should be carefully considered with the assistance of an experienced attorney.

The Power of the Automatic Stay

When you file for bankruptcy, the automatic stay will immediately go into effect. Essentially, this puts an immediate stop to all collection efforts against you, including wage garnishments, creditor contact, and foreclosure.

After filing for bankruptcy, you are then eligible to apply for the Loss Mitigation Program through the Bankruptcy Court. Once you have applied, you are then typically eligible to seek a loan modification.

Considering a Short Sale Alternative

An alternative option to filing for bankruptcy is to seek a short sale, which occurs when the lender agrees to pay off a loan that is less than the value of the mortgage when the home is sold.

Short Sales and Credit Impacts

Though a short sale will ultimately impact your credit score, it may not have the same negative impact as filing for bankruptcy or being foreclosed. However, it’s important to understand that a lender must approve a short sale, and there is no guarantee that this will happen. As such, if there is evidence showing that you are able to afford your mortgage, the lender may deny your request.

Factors That Impact a Short Sale

Once a short sale is approved by the lender, the seller cannot receive any of the proceeds; instead, the closing costs are paid by the bank.

During the process of a short sale, there are many factors that can impact the success of the sale. If there are multiple loans, one of the lenders for that loan may reject the payoff that is being offered to them, which can set the whole process off target.

Other impactful factors can include:

  • Mechanic’s liens
  • Outstanding homeowners or association dues
  • Tax liens
  • Liquid assets that can cover the shortage of the loan.

Contact an Experienced Rockland County Bankruptcy Attorney

If you are concerned about a foreclosure, contact our firm today. At the Lauterbach Law Firm, our team understands how difficult these matters can be to navigate, which is why we will do everything in our power to help you make the best decision for your circumstances. Connect with us today to learn how we can assist you during these complex matters.