Served with foreclosure papers? What do you do?
Here is a brief summary of how the foreclosure process in New York works.
Step 1: Summons and complaint. When any court papers are served, do not ignore. Review them closely and contact an attorney.
Step 2: Respond to the complaint. Responding to the complaint in a timely fashion is vital to preserve any defenses you may have to the claims in the complaint. A defendant may serve a pre-answer motion to dismiss if the complaint is defective, such as if it does not state a viable claim or was improperly served.
Step 3: Foreclosure Settlement Conference. New York mandates a settlement conference in all residential foreclosure cases. Your attorney will appear at these conferences on your behalf and attempt to negotiate a modification or other workout option. The bank is required to negotiate in good faith (see CPLR 3408) and if they do not, can be sanctioned by the Court.
Step 4: Litigate. If the parties cannot come to an agreement in the foreclosure settlement conference, the case will proceed to litigation. The parties can demand discovery (documents, written responses, depositions, etc.) and ultimately will proceed to motion practice. The bank will attempt to obtain a summary judgment, which means that the Court grants judgment and appoints a referee without a trial based on their evidence alone. The homeowner can move to dismiss the case on a number of substantive grounds. If the Court does not grant a judgment summarily, the case will proceed to a trial of whatever outstanding factual issues remain.
Step 5: Judgment. The Court ultimately must approve the damages the bank is claimed to be owed, must appoint a referee and must approve the same procedures for a future auction. Once this is done, a sale is noticed.
Step 6: Bankruptcy? Once a sale is scheduled, the homeowner has fewer options to stop the sale from taking place. The homeowner may seek an emergency stay of the action from the Supreme Court, but must have a reasons for seeking t his relief. Or the homeowner may seek to stop the sale through a bankruptcy. For more information about this route, please see our Bankruptcy Page.
Step 7: Sale. Barring a bankruptcy filing or a state-court stay of sale, the property will be sold to the highest bidder at a public auction–typically the bank itself, who will often be granted to right to bid at the sale with its credit (i.e., the amount they are owed). Once this occurs, the homeowner is divested of his or her rights in the property, except for any surplus form the sale after any junior lien-holders are paid in full. The bank must make an application to forcibly remove the homeowner, however the ownership interests are extinguished (foreclosed) and the homeowner is essentially a holdover tenant.