What you should do if you receive a foreclosure notice:


First you need to tell whether the paper you received is a "Pre-Foreclosure Notice" or a "Summons and Complaint."

The Pre-Foreclosure Notice will usually be much shorter than a Summons and Complaint.   Sample of Pre-Foreclosure notice.   It will not have any Court information on it and will tell you that your Mortgage is a set number of days in default.

The notice is the lender's first step in starting a foreclosure proceeding.   They cannot start the foreclosure for 90 days after the notice.   That means that you have 90 days to try to figure out how to stop the foreclosure and hopefully make your mortgage affordable.   Use this time to find out all of your options for avoiding foreclosure.

The Summons and Complaint will usually be fairly thick. At the top of the first few pages it will have the Court information such as:

       SUPREME COURT OF THE STATE OF NEW YORK
       COUNTY OF BRONX
       ---------------------------------------------------X

The Summons and Complaint is how the foreclosure is started.   YOU MUST TAKE IMMEDIATE ACTION!   If you do not provide an "Answer" within the 20-30 days required, your lender will be able to get a default judgment against you without a fight.   As desperate as the situation may seem - there is a lot you can do!   Start by doing the following:

  1. Make a record of how you received the Summons and Complaint using the Summons and Complaint Notes Form.   Bring this form with you to any lawyer, court or counselor you consult.

  2. Call and make an appointment with an Attorney experienced not just in handling a foreclosure lawsuit, but in all of the options available to you.   Most lawyers will give you an initial consultation for free and without any obligation.

  3. If you are having trouble getting an attorney you feel comfortable with or getting an apppointment quickly, call and make an appointment with one of the many FREE counselors available throughout the Bronx and Manhattan.   While the counselor may not be able to provide you with legal representation, he/she will be able to explain all of your options and head you in the right direction.

  4. While it is not recommended that you do this yourself, you can use this sample Answer to serve an Answer and avoid a default.

UNDERSTANDING FORECLOSURE:


What is a Foreclosure?

A foreclosure is the court action in which your lender seeks to sell your house for not paying your mortgage.   Although foreclosures are scary and something to be concerned about, the bank cannot simply sell your home after one missed payment; rather they must take the legally required steps in order to give you a chance to save your property.   That said, the foreclosure process is just that - a process - and can take months or even years to resolve itself.

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Can the Bank Really Take My Home?

When you bought your house, you probably needed to borrow a large amount of money from a bank.   When the lender agreed to loan you this money you signed what is called a "Note."   The Note is the document that says how much you borrowed, at what interest rate and how you promised to pay it back.   You also signed a "Mortgage" to put the house up as collateral for the loan.   Should you miss your mortgage payment, the bank can sell the property to recover the money still owed on the loan.

In theory, the bank can take your home if you are not paying your mortgage.   However, just because you have defaulted on the loan, is not necessarily the end of the road.   There are generally one or more home-saving options available to you to get back on track with your mortgage payments.

To learn more about these options, please read the section What you should do if you cannot afford your mortgage.

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How are Mortgages Foreclosed in the Bronx?

Bronx County, like most of the country as a whole, is facing an historic level of foreclosure activity.   Because of the unprecedented number of new foreclosures being filed, the courts are significantly backed up, which means foreclosure cases are taking longer to conclude.   The longer it takes for the bank to foreclose your home, the longer you can live in the home - rent fee - without being evicted.   Of course, you will probably want to resolve the foreclosure as quick as possible, so that you can get back on track with your life.

Typically, foreclosure cases in the Bronx go as follows:
  1. Borrower misses a mortgage payment - Although most mortgages contain language that allows a lender to foreclosure on a borrower after one missed payment, most lenders will not pursue a foreclosure until at least 3 months of missed payments.
  2. The lender sends notice of their intent to foreclose - Effective January 14, 2010, lenders must give at least 90-days notice of their intent to borrowers. This notice must inform the borrower of, among other things, the date of their default, the number of days they are past due, the amount which is currently owed and the amount of time the borrower has to pay the past due balance before the bank may seek a foreclosure.
  3. The foreclosure case commences - If the borrower fails to cure their default within the time allowed under the 90-day notice, the bank will thereafter begin the foreclosure process.   To do so, the bank will hire an attorney, who will draft and file the initial court documents, called a "Summons and Complaint."   The summons announces that a lawsuit has begun and the complaint outlines the specific allegations against the borrower.   The bank's attorney will then hire a process server to deliver the summons and complaint to the borrower.
  4. Your time to respond - Once you are served with the Summons and Complaint, you are obligated to respond to these papers within a strict timeframe. Your response, which is called an "Answer," must be sent within 20 days of receiving the Summons and Complaint if you are personally served, or within 30 days of receiving the Summons and Complaint if you are served by an alternative method.   Failure to respond to the Summons and Complaint within the appropriate timeframe will result in a default judgment, meaning that the lender will automatically win the foreclosure, and worse, that you will not be given an opportunity to defend your case. Defaulting on your time to answer is, therefore, the single worst thing you can do.
  5. Mandatory Settlement Conference - Regardless of whether or not the borrower answers the Summons and Complaint, the bank must file for a Settlement Conference within 60 days of the date of service upon the borrowers.   The Settlement Conference, is an in court session with the borrower, the lender's attorney and a referee with judge-like authority.   The purpose of the conference is to seek out a positive outcome in lieu of the sale of the borrower's home. These Settlement Conferences are a great opportunity to discuss options like Loan Modifications, Short Sales, Deeds in Liieu of Foreclosure, Reinstatements, Repayment Plans, Forbearance Agreements, etc.   Generally, there are several appearances required at these conferences, as these foreclosure alternatives can take several months to come to fruition.
  6. Judgment of Foreclosure - Assuming an agreement cannot be reached between the lender and the borrower to avoid a foreclosure, the bank will eventually seek a judge's order to sell the property at public auction.   The judge must first be satisfied with the findings of an independent referee, who is appointed to compute the amounts owed by the borrower on the note and mortgage.   If these numbers prove satisfactory, the judge will sign a Judgment of Foreclosure and order that a sale date be set.   The sale date will not commence for at least 30 days after the Judgment of Foreclosure and the borrowers must receive notice of this sale.
  7. Auction/Sale - If the sale takes place, it will be at public auction and any member of the public may bid for the property.   If a member of the public buys the property, that individual will take title and will have to go through a formal eviction process to remove the borrower from the home.   The eviction can take one or more months.   If there are no sufficient bids from the public, the lender will buy back the property, at which point the property will be called "REO" (Real Estate Owned).   The lender, then, will take title and can also seek to evict the borrower, but usually the lender waits longer to do so, as they are not in as much of a rush to turn the property over to make a profit; rather they will more likely look to sell the property on the open market.
  8. For a Visual breakdown of the foreclosure process, please see the following link: Foreclosure process.


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I Have Tenants in My Property.   Do They Still Have to Pay Me Rent?

The short answer, probably!

When a foreclosure commences against a borrower, a copy of the Summons and Complaint will be sent not only to the borrower, but also to anyone with an interest in the house.   This includes any co-borrowers/co-signors, anyone on the deed/title to the property and all tenants.   Notice is required for these individuals because they all have an interest in the foreclosure litigation, since its outcome may affect their enjoyment of the property.

Because they are entitled to notice of the lawsuit, it is only a matter of time before the tenant learns that the borrower is in foreclosure.   In fact, tenants often find out about the lawsuit before the borrower does, as the borrower does not always live at the property being foreclosed. Upon receipt of this notice, many tenants refuse to pay rent, under the notion that "Hey, if the owner isn't paying, than why should I?"  

This logic is misguided, as the tenant is still required to pay rent to the borrower during foreclosure, unless they are otherwise notified that a third-party has been appointed to collect rent and maintain the property during the suit. That said, there is a continuing obligation on the part of the tenants to pay rent, be it directly to the owner or to a third party.

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My Tenant Stopped Paying Rent. What Can I Do?

If a tenant refuses to pay rent, the borrower can seek to have the tenant removed by filing for an eviction (Note: A borrower CANNOT forcibly remove the tenant, lock them out, or otherwise prevent them from getting into the property for their failure to pay rent.   In order to evict, a homeowner MUST go through the courts to have the tenant evicted.   Taking the law into one's own hand [called "self help"] is unlawful and can subject the homeowner to monetary damages three times the value of the damage.