The Covid-19 pandemic has certainly put the entire world in an economic rut. Due to the virus, it has caused many Americans to put a pause or even a halt on their financial obligations. It has been very hard for individuals to pay their rents and mortgages. This is why the U.S. Government had no choice but to put in moratoriums to prevent said individuals from living on the streets. The U.S. has commenced moving back to normalcy with the administering of the vaccines which is certainly good news.
Even though Mayor Bill de Blasio plans to fully reopen New York on July 1, 2021, some New Yorkers are still faced with the adverse effect of the pandemic and being unemployed. New Yorkers have suffered greatly in meeting these financial obligations during the pandemic. Many of them are in default of their mortgages and would like to know what the outcome is going to be once the moratorium is lifted. This article will provide information particularly for New York homeowners in maneuvering foreclosure. The article is for informational purposes, if you need foreclosure help in New York, search for an attorney near you.
Reasons as to Why Foreclosure Occurs
A foreclosure occurs where the borrower fails to repay his debt/financial obligations to the lender. The lender then has the option to foreclose on the home to satisfy the remaining debt on the loan. After the debt is satisfied from the loan after the foreclosure, the surplus goes to the other creditors if any, and if funds remain, to the homeowner. There are a plethora of reasons as to why a homeowner may default on his financial obligations. These reasons are not limited to:
- Job loss;
- Death;
- Divorce;
- Medical difficulties etc.
The Covid-19 Pandemic has caused quite many New Yorkers to lose their jobs, and as such caused them to default on certain financial obligations.
How Many Payments Can Be Missed Before Foreclosure?
A mortgagee/lender can begin the foreclosure process after four (4) missed payments. Luckily for homeowners, New York is a judicial foreclosure state. This simply means that for foreclosure proceedings to begin the mortgagee/lender must file a complaint against the borrower. This judicial process may take months or even years to go through, giving the borrower more time to mitigate or offset his payments.
Can You Stop Foreclosure Once it Starts?
Yes, you can, but it depends on your current situation. As mentioned above the foreclosure process commences when the lender files a complaint in the courts against the borrower. During this judicial period, a borrower is given time to stop foreclosure. Ways in which the borrower may stop foreclosure are:
- Agree to pay the arrears.
- Pay the total amount due to the lender inclusive of the penalties and late fees by a certain date.
- Request a loan forbearance and the lender grants it.
- Seek refinancing options.
- Seek a loan modification.
- Principal reduction.
Loan Forbearance
This is where the lender will allow the borrower to pay a lower mortgage. This, however, occurs until the borrower is capable of resuming the regular mortgage payments.
Refinancing Options
This is where the borrower takes out a loan to repay the current mortgage. The possible benefit of this is that the borrower can seek a loan that has a lower interest rate.
Loan Modification
A loan modification occurs where the lender agrees to lower the interest rate on the borrower’s loan or extend the date to repay the loan.
Equitable Right of Redemption
The borrower does have rights even when faced with foreclosure. A borrower has an equitable right of redemption. This happens any time prior to the foreclosure sale, where the borrower fully satisfies the debt or completes up-to-date payments inclusive of the penalties. The debt would be considered satisfied and the borrower will not face foreclosure.
How to Stop Foreclosure in New York Without Keeping Your Home
There are foreclosure alternatives whereby a borrower may fully satisfy the loan. According to nysmortgagesettlement.com these foreclosure alternatives are as follows:
Deed in Lieu of Foreclosure
Under a deed in lieu of foreclosure, the borrower opts or agrees to turn over his deed to the lender. The effect of this is to satisfy the debt to the lender. The agreement must stipulate the debt is satisfied by the deed in lieu of the foreclosure. The benefit of relinquishing your home instead of the lender foreclosing it is that the foreclosure sale does not appear on your credit report. This step is really taken as a last resort of such. The mortgagor/borrower has exhausted his other means to prevent losing the title of the home.
Initiating a short sale
This occurs where the borrower attempts to sell the home to a third party to satisfy the debt but is unsuccessful. If this happens the borrower may agree to initiate a short sale. This is where the borrower sells the home to a third party for fair market value and the lender agrees to settle for a lower amount to satisfy the debt.
Conclusion
Even though foreclosures are not currently happening as there is an ongoing moratorium in New York, it is still wise to be aware of these safeguards in the case of a foreclosure. As mentioned above, because New York is a Judicial Foreclosure state, the foreclosure process takes a while before the Court grants a foreclosure in favor of the lender. The borrower, therefore, has time to get their affairs in order. That point is worth reiterating.
This article also outlined ways in which an individual may prevent foreclosure, when to look out for a foreclosure, and how to stop a foreclosure when it commenced. Even though the moratorium is currently there to protect them, borrowers should not be complacent and still find means to pay their debts to their creditors.
An individual may seek legal advice on how to get foreclosure help in New York from real estate attorneys dedicated to helping.
