What is a ”foreclosure”? The term “foreclosure” is a broad one and can apply to a foreclosure proceeding, foreclosure litigation, and/or foreclosure sale. The word has several applications: a) the litigation commenced is called a ”foreclosure proceeding”, ”foreclosure litigation” or ”foreclosure action”; b) the forced sale by the lender that comes at the end of the foreclosure proceeding is called: a ”foreclosure sale” or a ”foreclosure auction”.; and c) after the foreclosure sale, the resulting change of ownership from the foreclosure sale is often referenced as that the property was ”foreclosed upon”, “sold in foreclosure” or “was foreclosed”. Even, before a lender has initiated a formal, legal foreclosure litigation case, or d) while the file is in “pre-foreclosure”, the lender may refer to the homeowner’s status as “in foreclosure” or that their file is with their foreclosure department which is preparing to make a referral to their foreclosure attorneys. Also, foreclosure as a legal matter can vary greatly, state by state, since the laws of each state can be radically different. New York foreclosure law, which is the focus of this website, requires judicial foreclosures, whereas many states in the United States allow non-judicial foreclosures or a choice between judicial and non-judicial foreclosures. Clearly, the term “foreclosure” requires elaboration and context. On this page and throughout this website we will focus on the laws of New York State in the context of all foreclosure matters and debt litigation.
A foreclosure proceeding is the legal means that your lender can use to litigate to be able to eventually sell your house at a foreclosure sale auction. A foreclosure proceeding usually commences where the borrower on a mortgage defaults in paying on their note and the lender. After giving the borrower notice of the default, the lender initiates a foreclosure litigation, or foreclosure action. Before a litigation commences, the borrower typically tries to resolve matters either through a temporary forbearance agreement, a modification agreement, a reinstatement, a settlement and/or a possible sale of the property. Unless the borrower finds a way to resolve the arrears with the lender, the lender will eventually commence a foreclosure action with the filing of and service on the borrower of a summons and complaint. The borrower is able to respond to the complaint with an answer and typically tries to defend the several motions in the litigation, engage in discovery, attend all conferences and buy time and leverage while trying to find a resolution.
Because a foreclosure proceeding can eventually lead to a foreclosure sale, which typically involves the loss of the defendant’s home, the defendant usually tries to prevent and then prolong the foreclosure litigation. The defendant is usually able to gain time in the foreclosure through a combination of the following: foreclosure defense of the litigation, modification and negotiation efforts and/or cases under chapters 13, 11 or 7 of the bankruptcy code. The foreclosure proceeding can take at least one year to complete and often can take much longer, often up to 3 years or longer, especially when the borrower defends the foreclosure, seeks a modification and/or files a bankruptcy case(s). For more detailed information about any one of the following the following: foreclosure defense, modification and/or bankruptcy as a foreclosure solution click here and/or see below.
1. FORECLOSURE DEFENSE OF THE LITIGATION
Foreclosure Defense involves the property owner, and/or the mortgage note borrower, defending the foreclosure litigation initiated by the lender. The foreclosure litigation is started by the lender only after the borrower defaults under the note by either not timely paying the regular monthly mortgage installments, or the taxes and/or insurance on the property or in the case of a reverse mortgage the death of the borrower(s). The lender in the litigation becomes the plaintiff and the property owner and/or borrower become the defendant(s). See, Section on Foreclosure Defense, in this website.
A. Pleadings – The pleadings are the summons and complaint filed by the plaintiff and the answer filed by the defendant. The complaint has the basic allegations by the plaintiff and the requested relief in terms of foreclosure on the property. At the same time the plaintiff files the summons and complaint, it also files the notice of pendency which, gives notice of the litigation against the property and needs to be refiled every three (3) years. The answer has the responses and the affirmative defenses of the defendant and its affirmative defenses. Affirmative defenses can include defenses such as: lack of standing, lack of possession of the original loan documents, defective 90 day pre-notice of foreclosure, defective default notice, violation of the statute of limitations, lack of good faith negotiations, robo-signing of critical documents, dual tracking of modification efforts and foreclosure effortsl;, violations of TILA and RESPA, lack of jurisdiction, defective service of process, and/or failure to state a cause of action. The answer also can assert counterclaims where the defendant asserts claims against the plaintiff. The defendant in lieu of or in addition to the answer can file a motion to dismiss where there a basic jurisdictional and/or material procedural defects in the form, substance, and/or service of process of the complaint. See section on, Complaint and answer in this website.
B. Foreclosure Settlement Conferences – Foreclosure settlement conferences are in court conferences scheduled by the court with the purpose of exploring possible settlement of the foreclosure before the litigation goes further than the initial pleadings. At the settlement conferences a judge, law clerk or magistrate tries to work with the plaintiff and the defendant to determine whether or not the defendant may qualify for modification and whether the plaintiff would consider modifying the the defendant’s mortgage loan. The settlement conferences are mandatory and for the plaintiff to continue the foreclosure litigation it must first file a request for judicial intervention which requests settlement conferences. The court will then schedule one or more (usually up to three (3)) settlement conferences, but usually ends these conferences where it is apparent that a modification is not possible. The court comes to this conclusion that modification is unlikely, either due to its own determination as to the defendant’s insufficient income or due to the plaintiff’s final determination that the defendant’s income or other circumstances mean that the defendant is not possibly going to be considered for modification. See Section on Settlement Conferences Part 1 and Settlement Conferences Part 2 in this website.
While foreclosure settlement conferences may consider other types of resolution besides modification, such as – a short sale, a short payoff, a forbearance agreement, a payment plan, a refinance and/or debt forgiveness – modification is the most frequent method of resolving the foreclosure where the parties can agree to do so. Modification allows the lender to consolidate the mortgage arrears together with the loan principal to create a new large loan obligation with new advantageous terms for the borrower, such as a lower interest rate and a longer term and possibly some deferred arrears at the end of the loan. The result is that the modified loan, despite its larger new amount, usually has a slightly lower monthly payment, than the former defaulted loan, due to the modified loan’s better terms.
C. Discovery – Discovery is the effort to gather facts by both sides in a litigation and sometimes is a major factor in some foreclosures where factual questions become material issues in a foreclosure for a court. There was a time where certain issues like robo-signing, standing and possession of original loan documents were central to some courts deciding foreclosure matters. More recently during the pandemic issues as to Covid hardship became central as to whether a foreclosure litigation could continue. Where discovery could be material, discovery requests like documents demands, interrogatories and/or depositions may play an important role in a foreclosure litigation. If the plaintiff does not yield the documents and information sought, the defendant could move to compel discovery. However, where the courts are less focused on factual issues, the discovery requests could potentially be a way to leverage time in a litigation and slow the progress of the plaintiff. See section on Discovery in this website.
D. Motion for Summary Judgment and for an Order of Reference – Where the foreclosure settlement conferences are not resolved with a modification or other settlement agreement, the court eventually ends the conferences without a settlement and the plaintiff is now able to proceed further with its litigation. The next filing by the plaintiff is usually the main motion of the plaintiff in the litigation which is a motion for summary judgment and for an order of reference. Where the defendant has answered the complaint, the motion is called a “motion for summary judgment”, because its purpose is to resolve the litigated dispute without a trial based upon the assertion by the plaintiff that there are no material issues of fact in dispute requiring a trial. However, where the defendant has not answered timely, the motion by the plaintiff is called a “motion for an order of reference” or a “motion for a default judgment”. These two motions – the motion for summary judgment and the motion for an order of reference – are very similar. A motion for summary judgment while emphasizing the plaintiff’s goal of striking the defendant’s answer, also asks for an order of reference. The order of reference refers a foreclosure referee to do a computation of what is owed to the plaintiff by the defendant under the mortgage note and due to the expenses and cost of the the foreclosure litigation. The motion for summary judgment also presents proof and arguments by the plaintiff which are intended to show the court that the defendant’s defenses in their their answer should be stricken and have no merit. The standard used on a motion for summary judgment is one where if the court takes the facts as presented by the defendant, and if there are no issues of material fact, the plaintiff still wins on the law. The defendant is able to oppose the motion for summary judgement with opposition and by cross-moving to show there is still outstanding discovery and issues of material fact that could alter the litigation results. Also the defendant tries to assert that if the disputed facts are determined in favor of the defendant, as they should be on a motion for summary judgment, that the plaintiff would have no ability to pursue the foreclosure. If the plaintiff prevails in its motion for summary judgment, the court grants an order for summary judgment and the litigation moves on. If the plaintiff loses in its motion for summary judgment, the plaintiff then needs to engage in an evidentiary hearing to determine certain material facts as determined by the court. When the court denies Plaintiff’s motion for summary judgment or motion for order of reference, it is usually not with prejudice, and the court usually specifies the deficiency in the plaintiff’s motion that needs to be corrected in order for the motion to be granted. The plaintiff usually submits a new motion incorporating the needed corrections and a new order for summary judgment and/or for an order of reference is usually granted. See Section on Summary Judgment and Order of Reference, in this website.
E. Notice of Computation, the Referee’s Report and Referee’s Hearing – The referee’s report is a report by the referee which computes the amount of principal, interest, taxes, expenses, and costs owed to the plaintiff. The referee’s report becomes known to the defendant, usually through a notice of computation. If the defendant opposes the notice of computation, the court may determine that a referee’s hearing is needed to resolve any controversies over what was owed. The referee’s report contains a breakdown of the amount allegedly owed and the expenses incurred by the plaintiff. Where the defendant questions and/or finds discrepancy in the amounts the plaintiff alleges are owed, the defendant has the necessary arguments to oppose the notice of computation and the referee’s report. However, the defendants efforts to question the referee report, even if initially successful in buying time and causing a referee hearing and/or corrections to the report, would not stop the report from being eventually granted. When the report is granted it is needed by the plaintiff to be integrated into the motion for judgment of foreclosure and sale as described below. See Referee Hearing and Notice of Computation, in this website.
F. Motion for Judgment of Foreclosure and Sale – The motion for a judgment of foreclosure and sale tries to show that the plaintiff has dealt with the foreclosure in a procedurally correct manner and that the amounts owed in costs, expenses and attorney fees should be granted to the plaintiff. Often the plaintiff proceeds without a notice of computation or referee hearing, allowing the defendant to protest the amounts alleged to be owed that the defendant did not have a prior opportunity to dispute. Issues that were not previously raised in opposing summary judgment and determined by the court in granting summary judgment, can be raised by the defendant in opposing the a judgment of foreclosure and sale. Often the computations in the motion for a judgment of foreclosure and sale are not supported by the evidence or by a breakdown and may be incorrect upon close inspection. Also often the amount of interest and attorney fees requested by the plaintiff can be objected to by the defendant where the foreclosure action was inordinately long and the extra interest and attorney fees needing reduction. Also because service issues, standing issues and issues pertaining to the 90 day notice are all issues that are not usually waived and can be asserted late in the foreclosure action, these issues if not previously resolved by the court, can still be raised. In addition to objecting to the motion for a judgment of foreclosure and sale, the defendant can cross move to vacate the order granting summary judgment to the defendant. See, Section on Judgment of Foreclosure and Sale, in this website.
G. Notice of Sale and Foreclosure Auction Sale – After the judgment of foreclosure and sale, both the plaintiff and the court appointed referee have the court’s permission and instructions in terms of conducting the foreclosure auction sale in terms of having the following: the judgment amount, the allowed costs and attorney fees and the place of the sale. There needs to be published and mailed notice of the foreclosure auction at least four weeks prior to the sale. The sale date should not generally be long after the date of the judgment of foreclosure and sale. RPAPL Section 1351 was amended on December 20, 2016 to require that: ”The judgment shall direct that the mortgaged premises….be sold…..within ninety days of the date of the judgment.” Practically, it may be difficult for a lender to conduct a sale within ninety days of the date of the judgment and some judges temper the language by adding an exception, such as, ”or as soon as practicable.” In addition to the RPAPL, certain persuasive, but not binding, caselaw such as Bardi vs. Morgan, 17 Misc. 3d 927 (N.Y. Sup. Ct. 2007) which has held that “in any case where an auction sale has been scheduled more than one year after the entry of the judgment of foreclosure and sale, the notice of sale is invalid and the Clerk of this court is directed to reject it, unless an amended and updated order of reference and a supplementary foreclosure judgment reflecting the corrected amount is provided.” Courts have allowed sales to proceed despite an older judgment of foreclosure where the plaintiff has moved and had granted a motion to extend its time to conduct a sale of the property. Where there has been a prolonged delay with the sale, and where the plaintiff has not moved to extend its time to sell the property, a defendant, through an order to show cause may prevail on objecting to the sale.
At the foreclosure sale, an auction is held and is administered by the court appointed referee who reads the terms of sale which make clear that the high bidder must give a 10% deposit of their winning bid and close within 30 days of the auction. The initial bidding starts at an ”upset price” determined by the plaintiff and the plaintiff has the right to bid in the full amount of its claim although it does not always choose to do so. The high bidder is the party offering the highest amount for the property and possessing the required 10% amount of its bid. The high bidder agrees to take the property ”as is” and agrees that time is of the essence in closing on its bid. The closing on the auction purchase is supposed to occur within 30 days of the auction at the referee’s office. If the high bidder fails to close, they will lose their downpayment and high bid and a new auction would need to be scheduled. See, Section on Notice of Sale, in this website.
2. REVISITING ISSUES IN THE FORECLOSURE LITIGATION: REARGUMENT, RENEWAL, MOTIONS TO VACATE AND APPEALS
Often a defendant and their counsel believe that the court had not been correct, fair or judicious in making its decision, order and/or judgment. Where the defendant wants to revisit these issues, it has several choices — a motion for reargument, renewal, to vacate an order or an appeal. These different methods of revisit matters already decided can be described below:
A. Motion for Reargument – A motion for reargument needs to be made within 30 days of a notice of entry of an order determining a prior motion and is made based on fact or law allegedly overlooked or misapprehended by the court in deciding the prior motion, but not matters not presented on the prior motion. A motion for reargument needs to be made where the defendant did defend a motion and needs to be based on such prior opposition and not on what was outside of such opposition. Because a motion for reargument usually goes to the same judge who made the original decision, it is difficult to have granted. Often, at the same time as the motion for reargument, the defendant also files a notice of appeal, thereby preserving its right to also appeal the decision that is being contested. See Section on Motion for Reargument, Motion for Renewal and Vacating an Order, in this website.
B. Motion for Renewal – A motion for renewal is made based on new facts not presented on the prior motion or a change in the law, that would change the prior determination and the failure to present such new facts or change in the law can be reasonably justified. A motion for renewal needs to be made where the defendant did defend a motion and needs to be based on either: i) changes in the law since such opposition that may change the court’s decision, and/or ii) facts that were unknown at the time of the motion, but are now newly discovered and were not and could not have been reasonably known at the time of the prior motion. Unlike a motion for reargument, a motion for renewal is not given a deadline and presumably can be filed at any time. However, the burden is on the movant on a motion for renewal when the basis is newly discovered facts, because the question asked by the is usually whether the facts could have reasonably been discovered earlier. A change in the law or in the case law is usually a safer basis for a motion to renew.
C. Motion to Vacate Order – A motion to vacate an order can be made based on several alternative reasons: a) excusable default if made within one year of the order; b) newly discovered evidence that may have produced a different result; c) fraud, misrepresentation or other misconduct by an adverse party; d) lack of jurisdiction to render the the judgment or order; or e) reversal, modification or vacatur of a prior judgment or order. A motion to vacate an order, unlike motions to for reargument or renewal, can be made where the defendant failed to file opposition to a prior motion and defaulted. Except for the 1st and most frequently used subsection dealing with ”excusable default’, there is no deadline on filing a motion to vacate an order. However, because the first prong, “excusable default” is the most common basis for the motion to vacate, timing here is also important. To show excusable default, there needs to be both a i) reasonable excuse, and ii) a meritorious defense.
D. Appeal of an Order or Decision – Where going back to the Supreme Court judge, who gave the original decision or order, is not a feasible option, the better way to revisit the decision or order would be an appeal to the Appellate Division which is the next level of jurisprudence in the state court system. An appeal must be taken by filing a notice of appeal within 30 days of the entry of the order or decision appealed from. Within 6 months of the notice of appeal, the appeal needs to be ”perfected” with a memorandum of law and a record on appeal which contains all documents on the record in the court below. The standard on appeal is whether the court below erred on questions of fact and/or questions of law in its order or decision. The advantages of an appeal are that new judges are reviewing the legal issues raised, rather than the original Supreme Court judge who rendered the original decision. Also, the decision of the Appellate Division is not just binding on the present case but also potentially has precedential value beyond the case. The only disadvantages with this appeal system is that it is very time consuming to get a decision (decisions can potentially take over a year) and meeting the requirements for an appeal are involved and expensive (perfecting an appeal requires a long sophisticated memorandum of law and comprehensive record on appeal). Because the appeal itself is so time consuming, where there is an emergency, the appellant can present the Appellate Division with an order to show cause for a “stay pending appeal”. If the stay is granted, the case would not be able to proceed during the length appeal. Sometimes the Appellate Division requires a bond in order to grant a stay pending appeal. Often, the defendant in a foreclosure, if disappointed with a court decision, and believing that the Supreme Court may have erred, can both move for reargument and file a notice of appeal within the same 30 day period after the notice of entry of the decision. The Notice of Appeal reinforces and give cover to the motion for reargument and lets the judge know that the Court should be careful in deciding the matter, since the defendant is considering an appeal of the decision if it gets no reconsideration or moderation of the order. See, Section on Appeal, in this website.
3. MODIFICATION AND NEGOTIATION SOLUTIONS TO FORECLOSURE
A. Modification Solutions to Foreclosure-
1) What is a ”mortgage modification”? –
A “mortgage modification” is a very specific negotiation with the holder of the note in default aimed at consolidating the principal balance owed on the loan on the date of default together with mortgage arrears, fees, costs and escrows (taxes and insurance) that accumulated during the period of default. A mortgage modification is the most widely and frequently used method to resolve mortgage arrears when the borrower does not have the ability to reinstate the arrears or payoff the entire defaulted mortgage loan. A modification is needed when the borrower is in arrears because refinancing with another lender would usually be very difficult when the existing mortgage loan is in arrears. See, Section on Mortgage Modification in this website.
2) How is a mortgage modification obtained? –
However, the fact that mortgage loan modification is a frequently used solution for a mortgage that is in arrears, does not make obtaining a modification necessarily easy and often it can be challenging and/or difficult. That is because mortgage modifications are discretionary and their granting or denial is up to the lender. Effective loan modification efforts requires the submission of an application and many documents showing the borrower’s household gross income. The results with modification can vary widely depending on the applicant’s income, the lender’s internal review policies and the diligence and skill of the person making the submissions on behalf of the borrower. In some more difficult cases, several applications over a period of time and/or appeals are necessary, before the borrower is successful in obtaining a ’’trial modification”. Effective modification efforts also require experience and knowledge of each lender’s requirements.
3) What are the situations where modifications are sought and offered? –
Modifications can be offered in several ways:
i) Direct Application for a Modification to the Lender – The submissions are made directly to the lender and can be applied for at any time. The advantage is the direct dialogue with the lender, but that is also a potential disadvantage in that there is no court or person to pressure the lender into a more lenient and/or compromising approach;
ii) Foreclosure Settlement Conferences – These are court conferences in the beginning of a foreclosure action where the court encourages both the lender and borrower to negotiate with each other and tries to discern whether the borrower may have a possibility to obtain a modification;
iii) A ”Loss Mitigation” Chapter 13 or Chapter 11 Bankruptcy Case – These are bankruptcy cases where a plan of reorganization is based on the effort and possibility of obtaining a mortgage modification.
4) What can be done if the borrower is denied a modification? –
i) Resubmission of Modification Application – Applying again with hopefully more income, more documentation, and/or better support for the ability for the borrower to sustain payments on a sought after modification. Sometimes a down payment and/or a subrogation agreement from a secondary lender are necessary to have a better chance in a resubmission at getting a modification.
ii) Appeal of Modification Application Denial – Appealing the decision to deny the previous modification submission is not based on new facts, but based on the denied modification application, where the modification applicant asserts that the lender misunderstood, miscalculated, understated and/or otherwise erred in its determination to deny a modification to the applicant.
iii) Complaint Over Decision to Deny Modification – Where the applicant is denied unfairly for a modification there are several agencies to complain to: the NYS Attorney General’s Mortgage Enforcement Unit or with The NYS Department of Financial Services or with the federal Consumer Financial Protection Bureau.
B. Negotiation Solutions to Foreclosure –
1) What are negotiated solutions to foreclosure?
Negotiated solutions to foreclosures are divided between “retention” and “non-retention” options. Retention options are negotiation options that allow the property owner to retain their property, while non-retention options are negotiation options that allow the property owner to do the opposite, and to give up the property, which is almost always in a financially distressed state, and often on the brink of being lost anyway, in return for advantageous terms, sought by the property owner. Examples of of negotiated solutions that are non-retention options are: a regular sale (where there is equity in the property), or a short sale (a sale where the lender takes a discount, out of necessity, to allow the sale, because the there is usually negative equity in the property), a deed in lieu (where in return for the deed the lender does not pursue a deficiency), a consent to judgment (where the property owner agrees to an expedited foreclosure), or cash for keys (a cash payment from the lender to the property owner in return for possession). Examples of negotiated solutions that are retention options are: a reinstatement (of the amounts needed to cure the mortgage arrears), a short payoff (of the amount needed to payoff the loan amount, minus an agreed discount), an installment plan to catch up on the arrears (time to catch up) and/or a modification or a more creative restructuring of the loan (with some advantageous terms and forgiveness and/or deferment of some of the arrears). See, Section on Negotiations as Foreclosure Solutions , as part of this website.
2) What are examples of foreclosure “retention options”?
Retention options include ways to either “payoff” (pay the mortgage in full) or “reinstate” (pay the mortgage arrears) in order to either cure all mortgage arrears and make the mortgage current, or to pay everything owed on the mortgage and end any obligation through payment in full. Methods of paying off the mortgage, include a friendly voluntary sale or friendly short sale of the property to a “friendly person”, such as a relative, who has the ability to either pay in full, or through negotiation, short pay the mortgage. The relative then could allow the property owner to stay and potentially buy the house back when they are able to do so. The difference between a voluntary sale and short sale is that in the short sale the lender agrees to take a lesser amount that does not payoff the full mortgage balance. Refinancing by the property owner can accomplish a payoff, but is not frequently used because the property owner is usually in a difficult financial condition when attempting to avoid foreclosure and refinancing is often not available. Other options are reinstatement or a short reinstatement by the property owner, or a friendly person on their behalf. Another retention option is a “forbearance agreement” which allows the property owner to avoid foreclosure over past mortgage arrears, if they agree to later pay future mortgage payments in a timely manner. Finally, the most used retention option is a “mortgage modification”, which because of its widespread application was put into the separate category above.
3) What are examples of foreclosure “non-retention options”?
Non-retention options include ways for the property owner to give up ownership and/or possession of the property in return for some agreed benefits. A “deed in lieu” is an agreement where the deed or ownership over the property is given to the lender in return for forgiveness for any deficiency. A “cash for keys” agreement is an agreement where possession over the property is given to the lender in exchange for payment. A “consent to judgment” agreement, does not involve the property owner directly giving up either ownership or possession to the lender, but they do concede to the lender the entire foreclosure process. Finally, a “third party voluntary sale” or “third party short sale” are sales by the property owner to a to a third party, which would usually require the property owner to relinquish both ownership and possession over the property; the difference between the two is that the short sale is for less than the full mortgage payoff.
3) How are negotiated solutions to foreclosure obtained?
Negotiated solutions to foreclosure are obtained through an application process which is not unlike that used for mortgage modification. All pertinent financial information is requested and reviewed by the lender in an effort to see whether a resolution to the foreclosure could be found and what that resolution could be. Many resolutions – voluntary sales, short sales, payoffs and short payoffs – depend on whether or not there is equity in the property or whether the property is upside down with the mortgage exceeding the value of the property. Other resolutions – deeds in lieu, modifications, and/or short sales – depend on whether or not there are junior mortgages, judgments and/or other liens on the property. Other resolutions – refinancing, forbearances and/or modifications – depend on the income of the applicant.
4) What is generally the approach when a particular negotiated solution to foreclosure is denied?
As with modification denials, the fact that there was a denial does not mean that the application would be denied again under other circumstances with some improved application credentials. Circumstances can also change if the lender or its servicer change and/or if the lender is trying to move forward with a foreclosure action and has setbacks in its efforts. Therefore resubmissions of applications for negotiated solutions are common. Also often the end goal of an application may change to a more attainable goal in terms of a resolution. Finally, a denial may be appealed or a complaint may be filed with a government agency overseeing mortgage resolutions.
C. What if Modification and Negotiation Solutions are Repeatedly Denied and Do Not Appear Presently Available?
Sometimes the borrower is denied repeatedly for modification and/or negotiation solutions. This often is due to the borrower’s challenging situation. Challenging situations could include ones where: i) the property is inherited property and the applicants are heirs, ii) a missing or non-cooperative person is jointly on the deed or mortgage, iii) a divorce causes there to be different needs for the former spouses, and, iv) a straw buyer of the real estate etc. These situations may be difficult but a skilled foreclosure negotiator would stay with the situation and would not give up. Applications can be enhanced and made to look more appealing with a down payment (or a larger one if that was offered already) and with higher income (than in the last application). Where modification is not possible or allowed, other solutions, like bankruptcy solutions, real estate solutions and litigation defense may provide options. Applications can be enhanced with more income and higher downpayment and a new lender. Where arrears are not too high, a chapter 13 catchup plan allows spreading the property owner’s arrears and debt over a 60 month (5 year) plan.
4. BANKRUPTCY SOLUTIONS TO FORECLOSURE
Bankruptcy options offer several advantages to foreclosure defendants including the following: 1) an “automatic bankruptcy stay” that stops all foreclosure proceedings including a potential foreclosure auction sale, 2) a potential opportunity for the elimination, reduction, and/or reorganization of the all of the property owner’s debt; 3) a potential opportunity to force the lender to accept monthly mortgage payments going forward and a catch-up plan that divides up the mortgage arrears into monthly plan payments, and/or 4) the opportunity to seek “loss mitigation” or modification, negotiation or voluntary sale or short sale options, while under the protection of the bankruptcy court. See, Section on Bankruptcy Solutions to Foreclosure, in this website.
A. Chapter 7 of the Bankruptcy Code as a Solution to Foreclosure – Besides providing a stay of a foreclosure proceeding, Chapter 7 of the bankruptcy code eliminates a potential deficiency at the end of a foreclosure, as well as a broad array other debts that could accumulate during a foreclosure situation where the household is usually suffering economically. Other debts stayed and then discharged in Chapter 7 include: debts such as real estate taxes (which are a lien against the property but dischargeable debts as to the individual homeowner), secondary mortgages, home equity loans, business loans, vehicle loans, personal loans, credit card debt, utility bills and/or medical bills. A Chapter 7 case usually lasts 3 1/2 months and unless the lender moves for relief from the stay, it provides a reprieve from a foreclosure proceeding during that time. To the extent the property owners are a husband and wife, each of them can file separate cases, thereby doubling the time they would have. After a foreclosure proceeding, a Chapter 7 case can stay an eviction action against the former property owner, who is now considered to be a ”holdover tenant” in a landlord tenant proceeding. However, not every property owner can or should file in Chapter 7; there are criteria to filing Chapter 7 where the debtor can not show income or equity in assets beyond certain limits. The income of a Chapter 7 debtor can not be above their six-month average, median, gross household income, based on household size, as adjusted by certain expenses that reduce that income (see, Means Testing chart in this Website). The median income limits in NYS on or after May 15, 2022, based on household size were: 1 person: $63,548; 2 people $80,784; 3 people $96,854; 4 people $117,706; and $9,900. for each additional person. Also they need to pass a “budget test” in that their monthly going forward budget needs to be negative between their real net monthly income and reasonable, allowed expenses. To file in Chapter 7 the homeowner also does not want to have significant assets exposed, beyond the amounts of liens and allowed exemptions (depending on whether New York State or federal exemptions are chosen by the debtor) for a Chapter 7 Trustee to liquidate. See, Section on Chapter 7 Bankruptcy in this website.
B. Chapter 13 of the Bankruptcy Code as a Solution to Foreclosure – Chapter 13 is the most frequently used chapter of the bankruptcy code to deal with foreclosures because besides offering a stay of the foreclosure, it offers solutions that can and often work to resolve the foreclosure proceeding. In Chapter 13 there are several types of plans that address and potentially resolve the property owner’s mortgage arrears, together with all of their other debt, under a Chapter 13 plan that can be up to 5 years or 60 months in duration. A “traditional plan” or a “catchup plan” allows reinstating the mortgage arrears and all of the property owner’s debt over a 60 month plan. A ”loss mitigation plan” or a ”modification plan” is based on the goal of obtaining a modification of the mortgage as a vital part of the property owner’s Chapter 13 plan. Other types of Chapter 13 plans are based on pending voluntary or short sales of the property. While a plan needs to address all of a secured lender’s arrears under a plan, unsecured debts are treated differently and some plans are “percentage plans” which pay only a portion of unsecured debts like credit cards, medical bills and personal loans. Unlike a Chapter 7 case, which can only result in a discharge once every eight (8) years, a Chapter 13 case can be filed more than once by a debtor in an attempt to save their property from foreclosure. If initially unsuccessful with an ultimate resolution of the foreclosure situation, a property owner can file at least two (2) Chapter 13 cases within a year, if they can show a change in circumstances from their previous Chapter 13 case(s). However, the right to stay a foreclosure in Chapter 13 should not be abused by multiple cases without substance or effort, since a debtor in Chapter 13 needs to comply with many disclosure and payment obligations that need to met for them to continue with their case and for them to have an opportunity to try again if their initial Chapter 13 case does not resolve their situation. In a Chapter 13 case, besides reorganizing the mortgage debt, the debtor can also reorganize and/or try to object to or reduce other debts which they may dispute. One advantage in Chapter 13, which is unavailable in Chapter 7, is a potential move to strip down a secured secondary mortgage or home equity loan which has no equity to support it, if the first mortgage is already under-secured. The result after a strip down motion is that the debt for the secondary lien is treated as an unsecured debt under the plan and in appropriate situations may be paid at a percentage on the dollar, in a percentage plan, if available. A Chapter 13 case, is considered to be successful if the Chapter 13 plan is confirmed by the Court (usually within 3-8 months of filing) and the debtor can keep up with monthly payments under the 5 year Chapter 13 plan and can get a discharge of their debt at the end of the plan which usually reinstates, modifies or pays off the mortgage and otherwise deals with all of the debtor’s debts. See, Section on Chapter 13 Bankruptcy in this website.
C. Chapter 11 of the Bankruptcy Code as a Solution to Foreclosure – Chapter 11 is needed when the property owner is a corporation or when there is considerable secured or unsecured debt. See, Section on Chapter 11 Bankruptcy in this website. Chapter 11 cases are also usually required in larger situations of debt, even if the debtor an individual and not a corporation is filing, where the secured or unsecured debts limits are exceeded for a Chapter 13 case, which are $1,395,875 in secured debt, or $465,375 in unsecured debt, for cases filed between April 1, 2022 and March 31, 2025. A Chapter 11 case can not only stay a foreclosure proceeding or sale, but through the similar methods as Chapter 13 above, can also allow a reorganization of the mortgage arrears and/or other debt that are the cause for foreclosure and the entire debt of the corporation. There are several different kinds of chapter 11 cases: a) a regular chapter 11 case; b) a small business Chapter 11 case; c) a Subchapter V of Chapter 11 case. A Chapter 11 case as a vehicle of reorganization is more complex than a Chapter 13 case, in terms of its requirements, deadlines, strategies and options, but it is also at the same time more flexible with the its manner, timing, method and approach to reorganization, in order to allow a larger and more intricate business situation to seek workable solutions. As a generality, the entrance into Chapter 11, with the filing of a petition and related schedules grants an immediate bankruptcy automatic stay that protects the person or entity that files from any foreclosure activity, including an impending auction sale. Once in Chapter 11 the debtor needs to comply with a host of administrative requirements that are supposed to allow disclosure and oversight by the Court and trustee in administering the case. The debtor is afforded time in the case to get its financial issues in order, but needs to move by motion before taking any steps considered “outside of the ordinary course”; steps like the acceptance of a modification agreement, the entry into a contract to sell the property, and/or any negotiated resolution, would almost always require a motion. The Chapter 11 plan proposed by the Debtor usually proposes a method of paying creditors over time to keep the business alive, despite its being obligated to pay pre-petition debts in amounts that would otherwise overwhelm the business and cause it to shutdown. A regular Chapter 11 case has many voting requirements that make confirmation of a Chapter 11 plan potentially more challenging than confirming a plan in a Chapter 13 case. The Chapter 11 plan designates the treatment of creditors by classes of allowed claims and states which classes are “impaired” (or classes of creditors whose rights are altered under the plan) and who therefore get to vote in a Chapter 11 case. A Chapter 11 plan may be accepted by a class of creditors where there is an affirmative vote of at least 2/3 in dollar amount of the allowed, impaired claims, and more than 1/2 in the number of the creditors, in an impaired class that submits votes. While a Subchapter V case also formally has many of the same cumbersome voting requirements as a regular Chapter 11 case, in many ways a Subchapter V cases have more flexibility and resemble a hybrid of regular Chapter 11 and Chapter 13, and despite some tighter deadlines than the regular Chapter 11 case, a Subchapter V case may be advantageous where a plan is fair to creditors but a dominating creditor(s) is/are hard to satisfy and may hinder reorganization. In a Subchapter V case the Court may more easily overcome non-acceptance of the plan by creditors if it determines that the plan is “fair and equitable” and does not discriminate unfairly when it comes to the non-accepting, impaired classes. Subchapter V also has a different dynamic than regular Chapter 11 in that the trustee overseeing the case and reporting to the Court in a regular Chapter 11 case is from a federal, government office, the Office of the United States Trustee, and therefore may emphasize administrative compliance, whereas in a Subchapter V case, the trustee is a private business person, who can be a non-attorney, and who generally tends to take a more supportive role in helping a case move forward. See, Section on Subchapter V cases, in this website.
5. REAL ESTATE SOLUTIONS TO FORECLOSURE
Real estate solutions to foreclosure are frequently used to sell or otherwise transfer the distressed property that is undergoing the financial issues that created the foreclosure situation. See in this website the Section on Distressed Real Estate. The incentives to sell are potentially to: a) salvage the owner’s position in terms of equity, where there may be value in the property that exceeds the liens against it; b) avoid the potentially negative appearance, damage to credit and potential deficiency risks with losing the property in a foreclosure sale; c) find an arrangement where a potentially friendly purchaser may allow the owner to rent and remain longer at the property and possibly, if the former owner’s finances improve, allow the former owner, at an agreed upon price, to repurchase the property; and d) to the extent the above criteria are uncertain, these reasons, even if at the end they are tried but do not succeed, are worthwhile goals to justify delay of the foreclosure sale and a continued presence at the property. In most situations of foreclosure, the property is “upside-down” so a “voluntary sale” (where there is positive equity in the property, compared to the amounts of the liens against the property) which can yield a profit to the seller, is not the norm. A “short sale” (where there is no or negative equity in the property, compared to the liens against the property), and where the seller realizes no profit, is much more common. However, aside from profit, a short sale attains many of the advantages of a regular sale and has a better appearance in real life and on the credit report than the potential appearance foreclosure sale taking place. See in this website the Section on Credit Repair.
A. Voluntary Sale – A “voluntary sale” is a typical sale of the property where the property value exceeds the value of the liens on the property and the property owner is able to sell for profit. If the property is sold to a third party, as is typical in most voluntary sales, the property owner is using this option as a non-retention option and needs to transfer both ownership and possession of the property to the third-party buyer. This would be similar to any other closing on a real estate sale except because the property is in distress and there are usually mortgage arrears and/or real estate taxes owed, these amounts would need to be paid off at closing for the lender to give a lien satisfaction and discontinue their foreclosure litigation. If, however, the property is sold to a “friendly party”, which would require careful calculation and planning, this option, of a voluntary sale to a friendly party, can be used as a retention option, with the friendly party essentially being a potential ”stand in” buyer to help the property owner indirectly payoff the mortgage and to potentially later repurchase voluntary the property for himself. See in this website, Section on Voluntary Sales and Short Sales.
B. Short Sale – A “short sale” is similar to a voluntary sale of the property, but usually occurs when the property’s fair market value is less than the mortgage payoff amount, so that the property owner is usually unable to sell for profit and without a “short sale discount” by the lender, not able to sell at all. However, typically in a short sale, a buyer – whether a third party or a friendly party – is able to have the mortgage lender agree to take a reduced payoff to allow a sale of the property. The challenge in a short sale is to have the short sale buyer offer a high enough amount for the lender to agree that the offer would be close enough to or may potentially exceed potential bids if a foreclosure sale occurred, and should therefore be accepted. To extent a friendly party is a close relative of the property owner, the lender, if it realizes the relationship, out of principal has the discretion (which they sometime exercise differently) to refuse to allow a sale to a party closely associated with the defaulting borrower. Secondary liens on the property may make a short sale much more challenging in that there needs to be an accommodation to the secondary lien holder, without alienating the primary lien holder, which is already “taking a hit” in not going to be paid the full amount of their first mortgage lien. See in this website, Section on Friendly Short Sales and Friendly Voluntary Sales as a Retention Options.
C. Deed in Lieu – A “deed in lieu” is a way for the property owner to transfer the deed or property ownership to the lender in exchange for forgiveness of the secured debt owed to lender. Here the property owner is concerned about a potential deficiency, property liability and on going expenses to maintain and secure the property and is in a position to finalize matters quickly. Usually, this is an option used for secondary properties, that fell into disuse, that the owner sees no benefit in retaining or even delaying the lender’s taking ownership. This option, like short sales, becomes much more complex when there are secondary liens on the property. See in this website, Section on Deed in Lieu Agreements.
D. An “Informal Sale or Transfer of the Deed” – “An informal sale or a transfer of the deed” is where the deed is sold or transferred without a a formal closing and without paying off the mortgage. The results of such a transaction are that the new property owner, who is often an investor, is not the same as original borrower on the loan and resolution of the mortgage problems often becomes more complicated and difficult. Despite the lack of a formal closing the “informal buyer’ is going to be bound by any earlier filed “Notices of Pendency”, which are legal document filed at the commencement of a foreclosure litigation and refiled every thee (3) years, which are a warning to potential buyers and financiers of the onset (or continuation) of a litigation against the property. If there was a valid Notice of Pendency filed in a foreclosure action, the informal buyer is bound by the foreclosure, even though they were never served with process or any other litigation documents. The potential “informal buyer” would therefore be wise, prior to the transaction, to do a title search to determine all liens, encumbrances and potential litigations against the property, so the potential “informal buyer” is aware of the amount of equity in the property and any potential issues before finalizing the transaction.
E. Cash for Keys Agreements – “Cash for Keys Agreements” are agreements where the property owner agrees to relinquish possession of the property in return for cash. Cash for keys agreements have similarities to deed in lieu agreements and are used in many of the same situations where the property owner no longer has use for the property and wishes to relinquish its obligation to maintain, occupy and/or secure the property. There are key differences with the the two kinds of agreements as follows: i) Possession vs. Ownership – with a cash for keys agreement, a property owner gives up possession and with a deed in lieu agreement they give up the deed or ownership; ii) Cash vs. No Deficiency – with a cash for keys agreement agreement, a property owner gets cash in amounts that vary depending on the value and condition of the property, the procedural posture in the foreclosure litigation and particular needs/situation of the lender and property owner (usually $3,000-$5,000 on the low side, but as high as $25,000.-$50,000. on the high side); iii) Property Owner Usually Resides at Property vs. Property Owner Usually Not Residing at Property – with a cash for keys agreement, the lender is paying the property owner to leave and trying to compensate for the costs or relocating, however in a deed in lieu agreement, the property owner is usually not living at the property and just wants to avoid the potential further liability, maintenance and costs associated with ownership; and iv) Used Both in Foreclosure and Eviction Proceedings vs. Used Only in Foreclosure Proceedings – Cash for Keys Agreements are can be used in both foreclosure proceedings (where the property owner can give up possession, but where the lender still needs to finalize the foreclosure action) and eviction proceedings (which are only a dispute about possession), while deed in lieu agreements only deal with ownership and therefore can only take place in foreclosure proceedings. Often in a foreclosure case, where the homeowner wants to, but needs financial incentive or assistance to move, the lender is agreeable to only cash for keys if there are secondary liens requiring extinguishing in a foreclosure, but is agreeable to both cash for keys and a deed in lieu where there are no secondary liens on the property. See in this website, the Section on Cash for Keys Agreements.
F. Dealing with “Junior Liens”: Secondary Mortgages and/or Judgment Liens with Bankruptcy Motions and/or Subordination Agreements – Any “junior liens” potential secondary mortgages/secured loan (second mortgages and home equity loans) judgment liens, tax liens, HOA liens and other encumbrances on the property can get in the way of many real estate solutions to foreclosures, unless they are dealt with properly. Junior liens can potentially be issues with: efforts to short sell the property, short pay the loan, deed in lieu agreements, and/or modification agreements. It is therefore important to see if junior liens exist by looking at the caption from the foreclosure action since the lender is usually naming all lien holders in their action with the intent to give them notice and/or to extinguish any junior liens as part of the foreclosure sale at the end of the foreclosure action. A better way to reveal all liens is to run a comprehensive lien and/or title search to ascertain any encumbrances on the property.
i) Subordination Agreements – One way to deal with junior liens is a “subordination agreement” whereby the junior lien holders agree that their lien is subordinate (or lesser in priority) to the lien of the lender who currently holds the first mortgage, but wants to remain in that position if it should give the property owner a modification of their mortgage loan or another new mortgage loan instrument.
ii) Bankruptcy 522(f) Motions – These are motions made in Chapter 7 bankruptcy cases where there are judgment liens against the Chapter 7 debtor’s residence that impede their “homestead exemption”. Since the homestead exemption in New York State is currently $179,000. and applies to each person who owns AND resides in the home (usually a husband and wife), there are often opportunities in chapter 7 cases to void judgments liens.
iii) Bankruptcy Strip Down Motions in General – “Strip down motions” are bankruptcy motions that bifurcate a under-secured creditor’s claim to its to secured and unsecured portions. The motion essentially reduces an under-secured mortgage lien to the extent there is not enough collateral value in the property available to actually secure the entire lien. After the motion is granted the claim is deemed to be a secured claim only for the portion of the claim supported with value in the property and an unsecured claim for the portion of the claim not supported by equity in the property. To the extent the plan is a percentage plan for unsecured debt this strip down process can help the debtor in making the secured debt more manageable. Percentage plans pay unsecured debts with a percentage on the dollar and to the extent they are possible and feasible they can make a reorganization plan affordable. Strip down motions are only options in Chapter 13 and Chapter 11 cases; they are not allowed in Chapter 7 cases. For the strip down to be effectuated the debtor in a Chapter 13 or Chapter 11 case must have their plan confirmed by the Court and then they must complete the plan so that they discharge their debts. If the Chapter 13 or 11 case is dismissed before confirmation, the benefit of the strip down of the mortgage lien is usually lost.
iv) Bankruptcy Strip Down Motions on Residence – When it comes to a strip down motion against the debtor’s residence or actual home, a strip down motion is only available against a wholly unsecured secondary mortgage. This motion is only available against secondary loans (not primary loans against the residence) which are completely upside down (they can not have any secured portion).
v) Bankruptcy Strip Down Motions on Non-Residence – With non-residential property (a rental, vacation or investment property), the strip down motion is much more powerful. The motion here does not need the mortgage to be completely unsecured and the motion can be against the first mortgage if it is upside down. Against a non-residence the debtor can not only reclassify secondary mortgages and liens as unsecured (as with strip down motions against a residence) but can do so also for the portion of the first mortgage that exceeds the value of the collateral.
6. STAYING A FORECLOSURE SALE: ORDERS TO SHOW CAUSE, BANKRUPTCY AUTOMATIC STAYS AND OTHER METHODS OF STOPPING A FORECLOSURE SALE
At the end of the foreclosure process, there is a foreclosure sale where the referee appointed by the Court, conducts an auction sale for the property. The foreclosure sale is noticed for four weeks by mail to parties in interest and by newspaper notice with the intent of attracting third party bidders to the auction. Because 30 days after the auction the referee needs to close on the sale of the foreclosed property, the initial bid and 10% downpayment by the high bidder at the auction do not finalize the transaction. In order to finalize the sale, the high bidder needs to “close” on the sale transaction at a closing usually held at the referee’s office, where the high bidder pays the full balance due for the property, by tendering the remaining 90% of the winning bid and getting in return a “referee deed”. Once the high bidder closes on the sale and obtains the referee deed, it is the new owner of the property and usually seeks to gain possession of the property. In order to avoid the potential finality of the foreclosure sale and/or the closing on and transfer of the referee deed, the foreclosure defendant needs to on an emergency basis either stop a foreclosure sale before it takes place or if circumstances warrant try to vacate a sale that already took place.
A. Emergency Orders to Show Cause to Supreme Court – These are emergency applications brought to the New York Supreme Court, on 24 notice to the opposing attorneys, asking the Court for an immediate stay of the foreclosure. Usually Emergency Orders to Show Cause are based on reasons that are both procedural (in terms of technical defects in foreclosure action) and remedial (in terms of potential methods of legally resolving the foreclosure if the court gives an opportunity to do so). Procedural reasons often involve the following: service and noticing issues, standing and possession issues, issues with 90 day and default notices and issues involving calculation of the amount owed to the lender. Remedial issues often involve the foreclosure defendant being in contract to sell the property, being involved with an active modification effort and/or otherwise seeking to resolve the mortgage arrears. The Order to Show Cause application is unique in seeking several levels of a stay; there is the temporary restraining order (“TRO”) which asks for immediate relief shortly after filing the application, as would be requested where there is an impending foreclosure sale. The next level stay is a preliminary injunction which also seeks a stay but is more deliberative and seeks to hear from opposing counsel and have them file opposing papers. The goal of the applicant is a stay pending the deliberation and decision on the Order to Show Cause application. See in this website the section on Orders to Show Cause.
B. Order to Show Cause to Appellate Division – These have similarities to the Order to Show Cause to the Supreme Court, but are part of the an appeal of an already decided order from the Supreme Court that the foreclosure defendant believes was wrongly decided. The defendant/appellant would have had to file its Notice of Appeal within 30 days of the initial notice of entry of the decision. After that they have 6 months to perfect the appeal and and obtain the record on appeal. Here with an Order to Show Cause to the Appellate Divisions, the issues are more narrow and are based on the getting a stay pending the appeal. Thus The standards are: a) irreparable harm; b) balance of harms; c) likelihood of success on the merits; d) social policy. In addition sometimes the appellate division looks for a bond pending appeal if it is to offer a stay. Ultimately if the issues on appeal are sympathetic for the foreclosing defendant, the advantage of the order to show cause on the appellate division level is that the judge deciding the Order to Cause application is not the same as the judge who is being appealed.
C. Bankruptcy Automatic Stay – The advantage of a bankruptcy stay is that unlike the Order to Show Cause application it is not discretionary and is automatic upon the filing of a bankruptcy case. Whether the bankruptcy case filed is in Chapter 7, Chapter 11 or Chapter 13, the automatic stay goes into effect immediately upon the filing and 24 notice and an application to the Court are not generally required. Therefore if an Order to Show Cause is denied or lacks time or likelihood for success in obtaining a stay, a bankruptcy stay is much more certain. However, to sustain the bankruptcy stay during the months after the filing of the bankruptcy petition, the debtor would need to give disclosure in bankruptcy schedules and at the creditor’s meeting and show either income sufficient to reorganize in Chapters 11 and 13 and potentially make post-petition payments to a trustee or directly to the lender. Chapter 7 is not used as often to try to save properties, but in appropriate situations can buy time and discharge debt in addition to staying a foreclosure sale. The persons who can file to stay a foreclosure sale in bankruptcy are usually any of the owners of the property. In Chapter 13 and 11 the debtor has a choice of reorganization plans depending on their situation: a) a traditional or catchup plan which seeks to pay the monthly mortgage payment plus an amount necessary to catch up on what is owed in arrears over the term of the plan; b) a loss mitigation plan where the debtor is seeking a modification and makes estimated modification payments; c) a plan to sell or otherwise dispose of the property; and/or d) a plan to otherwise reinstate, payoff and/or transfer the property. See in this website a Section on the Automatic Bankruptcy Stay.
D. Consensual Stay Based on On-Going Modification and/or Sale Methods – Sometimes a lender is willing to voluntary stop a foreclosure sale if the foreclosure defendant starts applying for a modification and has a completed the modification application with all its requirements, more than 37 days before a foreclosure sale. This is also the same with a contract for a voluntary sale or a short sale; if the voluntary sale appears genuine and feasible the lender may on its own give the defendant an opportunity to implement the remedial option offered if it looks likely to conclude.
7. POTENTIAL ISSUES AFTER A FORECLOSURE SALE: VACATING THE SALE, SURPLUS PROCEEDINGS, DEFICIENCY ISSUES AND/OR LANDLORD TENANT COURT
Even after a foreclosure sale there are procedures to help the foreclosure defendant despite the fact that the property was sold at an auction and matters appear to be at an end. Often matters seem bleak and the options have significantly narrowed, however, even at this stage matters are not totally final because the foreclosure sale can be contested and the possession of property and the amounts owed may still issues.
A. Vacating the Sale – Where the foreclosure defendant believes that there were material, and highly prejudicial improprieties in the foreclosure proceeding and/or foreclosure sale, the sale can still potentially be vacated. This effort to undo the sale, is better to be raised before the closing on the winning bid and can be done shortly after the auction. The issues raised would need to be fundamental to the foreclosure (issues like jurisdiction due to service of process and/or standing issues are not waived) or to the auction (improprieties with the notice, time/date, descriptions) since Courts do not easily overturn foreclosure sales. In order to vacate a sale, the proponent for the defendants needs to show fundamental and/or serious wrongdoing in the sales procedure.
B. Surplus Money Proceedings – Where the foreclosure auction raises more funds than the amounts necessary to pay the mortgage payoff and other liens, the foreclosure defendant can institute a surplus monies proceeding to secure the extra, surplus monies for themselves, after showing by motion that all other liens and creditors have been dealt with and/or paid adequately.
C. Deficiency Issues – If the property is worth less than the total amount you owe on your mortgage loan, a deficiency judgment could be pursued by the lender after the foreclosure proceeding. If that happens, the lender potentially can demand additional moneys after foreclosing on the house. The defendant usually tries to maximize their chances to obtain a modification and/or to save money for when they may eventually need to leave their house. A deficiency proceeding is the opposite of a surplus proceeding by the foreclosure defendant, and instead is a proceeding brought by the secured lender for the unpaid balance on their loan. This circumstance, where the lender or another secured party does not get part or all of their money is much more common than a surplus money proceeding, where there is too much money. However the number that is looked at in assessing the possible amount of a deficiency judgment is not the sale price at a foreclosure auction but the fair market value of the property, which is usually higher than the purchase price in a foreclosure sale. To pursue the deficiency the plaintiff would need to do so within 90 days after the deed is delivered to the buyer after a foreclosure sale. The alleged deficiency can be disputed by the foreclosure defendant who could should show inefficiency, wasted time and delay by the lender, which all contributed to the deficiency.
D. Landlord-Tenant Issues – After a foreclosure sale, the foreclosure defendants are usually still at the property and still have possession of the property. The foreclosing plaintiff now changes its role in that their mission is not just to take ownership of the property, but now in its role in as owner, to evict the foreclosure defendant(s) who is/are now regarded as a ”holdover tenant” (or a person who previously had rights to stay at the property and now has overstayed those rights and is staying without a legal right). The plaintiff would need to give 14 days notice to the occupants and if they do not move out as required the plaintiff would start eviction proceedings which move much faster than foreclosure proceedings. The eviction proceedings are a new case and usually pursued in landlord-tenant court. See Section on Landlord-Tenant Issues, in this website.
8. WHY RETAIN THE LAW OFFICE OF RONALD D. WEISS, P.C. TO REPRESENT ME IN A FORECLOSURE PROCEEDING?
Our law office concentrates in foreclosure solutions that are broad, varied and range from complex/sophisticated to simple/straight forward. Often the solutions involve several remedies and seeing which ones or combinations work. Foreclosure proceeding, generally, can be prolonged, and sometimes significantly delayed, thereby adding considerable length and/or expense to the foreclosure. If the defendants are represented by attorneys, like the Law Office of Ronald D. Weiss, P.C., which is able to represent them in several possible foreclosure solutions, including litigation, modification, negotiation, real estate, and/or bankruptcy solutions, the defendants increase their time at the property, potential options for a resolution and ending of the foreclosure. Our firm is particularly adept in defending the foreclosure, as well as seeking out alternative solutions. See Information, About Our Firm, as part of this website.