How to Avoid Foreclosure in New York: Options for Homeowners

Act Early When a Mortgage Payment Is at Risk

The earlier you call your servicer, the more options you'll have. Don't ignore letters, calls, emails or court papers; they don't go away. Keep a copy of every notice, and write down the date, time, name and outcome of every phone call.

Pull together your recent mortgage statements, proof of income, bank statements, tax returns, a monthly budget and a short letter explaining what caused the hardship (job loss, illness, divorce, a death in the family). Your servicer or counselor may ask for more.

What to do depends on what you've received

The 90-day notice and an auction notice are very different. Neither one is a move-out date. Have an attorney read the actual papers.

Call Your Mortgage Servicer

Your servicer is the company you send payments to. It manages your account and reviews requests for help. Call the number on your statement and ask for the loss-mitigation or home-retention department.

Questions to ask

• How much do I need to pay to catch up completely?
• Has my loan been sent to a foreclosure attorney yet?
• Which assistance programs could apply to my loan?
• What documents do you need, and by when?
• How will I know my application is complete?
• Will the foreclosure keep moving while you review my application?

Send documents in a way you can track, and keep proof they were delivered. Keep following up. Sending paperwork doesn't guarantee approval or stop a foreclosure on its own.

Catching up vs. paying off

If you want to keep the house, ask for a written reinstatement figure: the amount to bring the loan current. If you're thinking about selling, ask for a full payoff figure: the amount to pay off the whole loan. Ask how long each figure is good for, because interest and fees keep adding up.

Keep a simple log of what you sent, when, proof of delivery, anything still missing, and the date the servicer confirmed your application was complete. A representative telling you on the phone "you're fine" isn't the same as written confirmation.

Options to Keep the House

What's available depends on who owns or insures your loan, the servicer's rules, your hardship, your payment history, your income and timing. The most common options:

FHA, VA, USDA, Fannie Mae and Freddie Mac loans each have their own programs. Ask who owns or insures your mortgage, then look up that program's options from an official source.

Forbearance isn't forgiveness. A lower payment can mean a longer loan or a lump sum due later. Get the written terms and check with your counselor whether you can afford it beyond the first few months.

When you apply matters

Federal rules generally stop a servicer from moving ahead with a foreclosure sale while it's reviewing a complete application submitted in time, but they don't require the servicer to approve you. See CFPB Regulation X § 1024.41 and ask your counselor about the timing in your case. An incomplete application doesn't automatically postpone anything.

Get Free Help From a Counselor or Attorney

A housing counselor helps you organize documents, understand your options and deal with the servicer. A New York attorney handles the lawsuit: court papers, defenses, settlement conferences and deadlines. In New York, both are often available for free.

New York Courts directs homeowners to 1-855-HOME-456 (855-466-3456) and HomeownerHelpNY.com for free counseling and legal referrals. DFS's homeowner Bill of Rights lists counseling resources by county; ask for help serving Queens, Kings County (Brooklyn) or Nassau.

Walk away from anyone who demands a big upfront fee, guarantees a modification, tells you to stop talking to your servicer or stop paying, or asks you to sign over your deed. Those are classic foreclosure-rescue scams, and in New York deed-theft schemes often target exactly these homeowners.

CashForHousez is a home buyer, not a counseling or legal service. Making an offer has nothing to do with whether you qualify for free help.

How New York Foreclosure Works

New York is a judicial foreclosure state: the lender has to sue you in court and get a judgment before the house can be sold. For most home loans, the lender must send a 90-day pre-foreclosure notice before filing the lawsuit. New York foreclosures are among the slowest in the country, often taking a year or more and sometimes several, which gives you time to act if you use it.

Most home foreclosure cases include mandatory settlement conferences at the courthouse, where you, the lender's representative and a court referee try to work out a solution. Go to every one, bring the documents they ask for, and bring a lawyer if you can. Talking to your servicer doesn't replace responding to the lawsuit.

Answering the lawsuit is a separate step

DFS explains that your written Answer is generally due 20 days after you're handed the papers in person, or 30 days if they were served another way. How you were served matters, so have an attorney confirm the actual date.

Going to the first settlement conference can give you an extra 30 days to file your Answer, but don't plan around that; aim to meet the original deadline. The Courts' conference guide lists what to bring.

A settlement conference is a chance to negotiate, not a guarantee the lender will agree. This guide covers mortgage foreclosure; property tax foreclosure, reverse mortgages and other situations have their own rules.

Selling Before Foreclosure

If the payment isn't sustainable but your house is worth more than you owe, selling may be the best way to protect your equity. The mortgage and any other liens are paid off at closing, and you keep what's left. A foreclosure auction rarely brings full market value, so waiting for the auction often means losing money you could have kept.

Ask your attorney or the title company for a current payoff, and check for property taxes, judgments, other liens, commission and closing costs. The balance on your mortgage statement won't be the final payoff; interest, late fees and the lender's legal fees keep adding up.

Signing a contract doesn't pause the foreclosure or cancel a scheduled sale. Work with your servicer and attorney, and get in writing what has to happen before each deadline.

Make sure the sale can actually close in time

• Get a current payoff and list every other lien and closing cost
• Confirm everyone who has to sign, including co-owners
• Compare real written offers and check proof of funds
• Read the inspection, assignment, cancellation and extension terms
• Ask your attorney how to close before any scheduled sale
• Confirm any postponement in writing from the right people
• Review how the money will be paid out and how liens will be released

A quick equity estimate: likely sale price minus every payoff and selling cost. That's not cash in hand, and a positive number doesn't guarantee the sale closes in time. For a line-by-line breakdown, see our guide to seller closing costs.

If the house needs work, compare an as-is listing with a written cash offer. A cash buyer can close faster because there's no lender on their side, but a promise to buy doesn't stop your foreclosure. Our guide to selling a house in foreclosure goes step by step, including New York's special protections for homeowners selling in foreclosure.

CashForHousez is a buyer and may make you an offer. Get independent advice and compare our offer with your other options. If the auction is close, call a lawyer first; an offer, a showing or even a signed contract isn't proof the auction has been stopped.

Other Alternatives

If the house is worth less than you owe, the lender may approve a short sale, where it accepts less than the full balance. In some cases it may accept a deed in lieu of foreclosure, where you hand over the house instead of going through foreclosure. Both need the lender's approval and a careful look at other liens, taxes, credit impact, relocation help and whether you'd still owe the difference.

Filing for bankruptcy pauses foreclosure temporarily through the automatic stay, and in some cases a Chapter 13 plan lets you catch up over time. It's a serious step with major consequences, so talk to a bankruptcy attorney, not a salesperson.

With a short sale or deed in lieu, ask whether the lender's written approval releases you from any remaining balance. Handing over the deed doesn't automatically end your personal liability. Forgiven debt can also be taxable, so check with a CPA and don't rely on old tax-relief rules.

The FTC's guide for struggling homeowners explains these options and common scams.

New York Homeowner Action Checklist

• Open, date and save every mortgage and court notice.
• Call your servicer and ask for the loss-mitigation department.
• Get every document request and deadline in writing.
• Call 1-855-HOME-456 for a free counselor and attorney.
• Pull together income, expense, mortgage, tax and insurance records.
• Go to every court conference and hearing.
• Compare keeping, modifying and selling the house with real numbers.
• Walk away from guarantees, pressure and big upfront fees.
• Get every important promise in writing.

Keep one folder for your counselor and attorney

• Every notice, court paper, envelope and date
• Loan statements and current reinstatement or payoff figures
• Income, bank, tax, insurance and monthly expense records
• Assistance applications and proof you sent them
• A log of every call and written response
• Any sale contract, buyer's proof of funds and closing estimates

Ask your counselor or attorney which dates are legal deadlines and which are just targets, and keep going until you have a written agreement or court order that changes your situation.