Residential Mortgage Loan Foreclosure in New York

As a homeowner, you may find yourself struggling to make your monthly mortgage payment. This may be because you or a household member suffered a loss of employment or reduction in income, a contributing wage earner passed away, there was some unexpected increase in your housing or other expenses, the terms of your mortgage loan adjusted to become unaffordable or the loan was unaffordable at the outset.

As a result of the mortgage crisis, the federal government created several programs to help homeowners stay in their homes. While most of these programs have expired, many lenders and their servicers continue to offer loan modification programs to assist you in getting back on track before foreclosure is commenced. There are very specific and beneficial modification programs if your loan is owned by Freddie Mac or Fannie Mae or is guaranteed by the Federal Housing Authority (FHA) or Veterans Administration (VA). Many of the major mortgage loan servicers also have their own in-house modification programs.

Whether these programs are available depends on the entity for which the loan is being serviced. A loan servicer is the entity that handles all borrower-related decisions. The “investor” is the ultimate owner for whose benefit the servicer acts. The term “lender” is a general term that typically refers to both the investor and the servicer.

You may be able to avoid foreclosure by seeking a loan modification, a repayment plan, a forbearance or even a refinance with a different lender if you are not yet in default.  If these options do not work for you, you may have to sell your home. If the home is worth less than the amount you owe on your mortgage, your lender may allow you to do a short sale. This is when you sell the home for the fair market value, but it is not enough to pay off the mortgage. Another way to avoid foreclosure is a deed in lieu. This is when you simply turn over the deed to the lender and walk away from the home. A short sale and a deed in lieu harms your credit score, but not as much as a foreclosure or bankruptcy.

Legal Editors: Thomas Tilona and K. Scott Kohanowski, City Bar Justice Center Foreclosure Prevention Project, December, 2017