Most people think that if they have had a foreclosure complaint served on them, that they will be homeless almost immediately. This is usually not the case. In fact, if a lender has filed a foreclosure complaint against you, it may actually be several years before you legally have to vacate your home.
The state of New York mandates that every foreclosure go through a judicial foreclosure process that helps protect the rights of homeowners, but can also take more than four years to complete. Some other states use streamlined non-judicial foreclosure proceedings that can take only a few months to complete.
Between the judicial foreclosure process, numerous laws that are favorable to consumers but complicate the process, and a state housing market that continues to lag behind the rest of the country, the New York foreclosure process is one of the lengthiest in the United States.
Even before the Great Recession of the late 2000s, the average foreclosure in New York took a little over a year because of the additional requirements of the judicial foreclosure process.
The Foreclosure Process
Typically, a lender begins foreclosure proceedings after a borrower has gone 90 days without making a payment on his or her mortgage. The lender must then provide the borrower with notice of the foreclosure action at least 90 days before filing a foreclosure complaint. The borrower then has between 20 and 30 days to respond to the complaint depending on how they were served.
After it came to light following the financial crisis of 2008 that many lenders improperly authorized or transferred home notes, New York passed a law in 2013 also requiring the foreclosing party to “produce the note” when a foreclosure complaint is filed so that it can prove that it has a legal right to initiate a foreclosure action. If the lender cannot produce this note, the action will be dismissed.
Several other laws enacted by the state can also lengthen the process. For example, a borrower can allege that a lender violated predatory lending laws that only apply to high-cost loans as a defense to the foreclosure action. Litigation related to one of these defenses can extend a case for months, if not years.
New York foreclosure cases also must go through mandatory settlement conferences, and two judgments are required to complete the foreclosure, whereas most states only require one judgment. Those requirements alone can add more than a year to the foreclosure process.
Foreclosures After The Great Recession
The weakening economy took what was already a lengthy process that on average lasted around 15 months and turned it into an ordeal that lasts 3-4 years, if not longer in some cases.
On average, it took around three years for a lender to foreclose on a home in New York in the first few years after the housing crisis began in 2008. That number hasn’t improved much over the past seven years.
While other states have seen their foreclosure rates reduced by a rebounding economy, New York has only seen a growing backlog of foreclosure cases that take years to resolve And the judicial foreclosure process is only part of the problem.
In the wake of the Great Recession, many borrowers found that they could purposely delay the foreclosure process and stay in their homes for years at a time without making mortgage or tax payments by demanding paperwork showing that the lenders were legally entitled to foreclose on the properties. In many cases, the foreclosing parties simply were not able to come up with paperwork to avoid dismissal of the foreclosure action. However, because of these cases and the 2013 requirement that foreclosing parties “produce the note,” many lenders have now improved how they track and gather paperwork. This has led to substantial reductions in the amount of time it takes for many foreclosures to be completed, but other factors have contributed to the ongoing backlog.
Other borrowers delayed the foreclosure proceeding for months by filing for bankruptcy, which can force lenders to come to more favorable terms on the mortgage, or at the very least delay the foreclosure until the bankruptcy case has concluded.
Homeowners refusing to fight a foreclosure action can also add to the backlog crisis. If a borrower vacates a home soon after receiving notice of the foreclosure, but before the bank has taken legal possession, it creates a “zombie home,” that can fall into disrepair. No one lives there anymore. The borrower has abandoned it, and the bank doesn’t have full legal possession, but someone is still responsible for the home. While banks want to collect on their collateral, they’re also hesitant to take on the upkeep and taxes required to maintain a “zombie home” that has been unoccupied for several years, resulting in properties that further clog the foreclosure system.
The Current Foreclosure Backlog Crisis
The result of the lengthy judicial foreclosure process, numerous statutory requirements that have to be met to complete a foreclosure, and the unwillingness of lenders to deal with “zombie homes,” was that by late 2014, it took on average more than four years for a foreclosure to be completed by a New York court.
New York’s housing recovery has also lagged behind the rest of the country. In 2015, New York still had the second highest rate of home loans in foreclosure in the country, standing at 5.5%. Only New Jersey is ahead of the state at 7.67%.
The number of new foreclosure cases in New York has fluctuated wildly in recent years, but the general trend has been upward. New foreclosures increased 78%, from 26,706 in 2006 to 47,664 in 2009 during the depths of the housing crisis. Only about 16,000 new foreclosure cases were filed in 2011, but that number rose to well over 40,000 annually in both 2013 and 2014. Many of these foreclosed properties are located outside of New York City, either upstate or in Long Island and the mid-Hudson region, while foreclosures in the city have stabilized.
Foreclosure filings did fall in the first half of 2015, but there are currently more than 90,000 pending foreclosures in the state of New York. Each of the thousands of homes in foreclosure in the state must go through the judicial process. The backlog crisis has led some officials to call for reform.
In May, Benjamin Lawsky, superintendent of the Department of Financial Services, spoke to the Mortgage Bankers Association and called for new legislation that would streamline the foreclosure process of so-called “zombie properties,” one of the major causes of the current backlog. Lawsky also put much of the blame for the current situation on the requirement that all foreclosures in the state go through the judicial process. Despite the attention that Lawsky’s remarks received in the media, there has been no formal attempt to change the foreclosure process by members of the legislature or Gov. Andrew Cuomo.
Foreclosure Time Frame Going Forward
The foreclosure process is starting to accelerate as lender attorneys become less overwhelmed and the Courts work through the backlog of cases. Some foreclosure actions are reaching the summary judgment stage in one year compared to the two year or longer time frame that applied during the recession. As these actions move more quickly through the judicial system, there is more of a need to litigate and negotiate zealously including: answer the foreclosure complaint on time, attend foreclosure conferences, consistently try for modification, contest all motions (for summary judgment and for a judgment of foreclosure and sale) and maximize time and opportunities for resolution.
That means that for now, New York’s complex web of foreclosure procedures and laws remain on the books, so it’s best to consult with an experienced foreclosure attorney about how to proceed with your case if your home is in foreclosure or a foreclosure complaint may soon be filed against you. Our experienced New York foreclosure attorneys have helped countless homeowners in Suffolk and Nassau counties with foreclosure and loan modification issues. To get answers to your foreclosure questions, contact us today at (631) 319-9136 or email today for a free consultation.