New York's Foreclosure Process | Real Estate | Business | Epoch ...

By Laura Gatea Created: June 27, 2012 Last Updated: June 27, 2012

A foreclosed home stands boarded up in Islip, N.Y. in February. Islip, which is located in Suffolk County, has the highest foreclosure rate in New York state. (Spencer Platt/Getty Images)

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When hearing the word ?foreclosure,? most people think about a property in distress that can make a good investment. But before the final sign is put next to that property, it?s important to know what steps are involved in the entire foreclosure process. As regulations differ from state to state, we have focused on how the judicial foreclosure process goes in New York.

Step 1. The Lis Pendens
Commonly referred to as ?pre-foreclosures,? a lis pendens represents the very first step in the foreclosure process. When a property owner doesn?t make three payments in a row, the lender files a lis pendens with the county clerk. This means that the property now has a pending lawsuit against it and its title is publicly contested.

At the same time the lender sends the borrower a ?summons and complaint? notice, which is a type of letter that informs him that a lawsuit has been initiated in court against his ownership over a property. The letter also includes other details such as the date to appear in court.

From the moment the notification is received, the borrower has 20 to 30 days to respond in writing to the summons and complaint, either with the help of an attorney, or by representing himself or herself in court. The borrower?s defense answer is then sent to the lender?s attorney and filed with the court.

Step 2. The Settlement Conference
As of December 2009, a mandatory settlement conference was introduced in the foreclosure process. This was done in order to help both parties that face this challenging situation reach an agreement regarding the debt. The conference is held by the court within 60 days after the date the summons and complaint were sent.

At the conference, the plaintiff (or the claimant) should discuss the initial loan amount, the amount that is still owed, the current balance, and whether the lender is subject to the Making Homes Affordable Program. The defendant should be prepared to discuss his or her financial status, the cause of the default in paying the mortgage, and to provide documentation so that the plaintiff can evaluate the possibility of a loan modification.

If requested, the court will usually grant each party the possibility to delay the conference. After the first postponement, all further postponements are granted at the court?s discretion.

If during the conference both parties agree on a settlement or loan modification, the plaintiff must file a notice of discontinuance of the lis pendens, meaning that the lawsuit was abandoned. The notice should be filed within 150 days from the official date of the agreement. In case the two parties have not reached an agreement, the plaintiff may proceed with the lawsuit.

Step 3. The Judgment
If agreement cannot be reached, or if the defendant has not responded to the summons and complaint, the plaintiff files a request for a referee to conduct the foreclosure auction. This is an attorney who will determine the full amount owed by the borrower to the lender and who will conduct the foreclosure sale.

The judge then signs a judgment of foreclosure and sale that allows the lender to sell the property at auction through the appointed referee. At least 30 days before the auction, the referee advertises the foreclosure sale in the local newspapers.

Step 4. The Foreclosure Auction
The final step is the public sale of the foreclosed property at auction. The bidding starts usually at $1,000 or sometimes at the upset price. The plaintiff always makes the first bid and the property is finally sold to the highest bidder. If the final bid does not exceed the plaintiff?s upset price, the plaintiff has to take possession of the property. In this case, the property becomes an REO or a real estate owned property.

If the property goes to a bidder, the bidder is required to make a 10 percent or 20 percent down payment and to close the sale within 30 days. If the bidder does not meet the 30-day deadline, he loses the down payment and the right to buy the property. This is why it is advisable to review the terms of sale to determine exactly what is required of the winning bidder.

More about the foreclosure steps and laws in New York can be found here:
http://www.nycourts.gov/courts/11jd/supreme/civilterm/partrules/civil_partrules_rf.shtml
http://www.banking.state.ny.us/hetpinf6.htm
http://council.nyc.gov/d28/html/members/NYSForeclosureProcess.pdf

To browse foreclosure listings in New York go to:
http://www.propertyshark.com/mason/NY/New-York-City/Foreclosures

Laura Gatea is a writer for PropertyShark.com. Property Shark is a property search site with market data for New York City and New York state. For original article, click here.

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