Legal Steps the Bank Will Take

The bank will usually send you many letters that ask you to catch up with your monthly payments. It usually takes several months for the bank to decide that it will start a foreclosure case to take back your house. Your mortgage cannot be foreclosed on without a court action. You will be served with a notice and given 20 days to answer the papers. If you do not answer the court papers, the bank will probably ask the court for permission to sell your home at a foreclosure sale. Even if you do answer the court papers, the court will eventually give the bank permission to sell your home if it decides that you have failed to make your payments. You should talk to a lawyer about what defenses you can write in your answer.

Your Bankruptcy Option

If the bank files a foreclosure case against you, it may help you to file for bankruptcy, since filing a bankruptcy automatically stays all lawsuits against you. However, after a judge signs a judgment of foreclosure against you, it may be too late to obtain a stay. In a bankruptcy proceeding, up to $50,000 per owner of your equity in your home is exempt from your creditor's claims as a "homestead exemption.” A married couple who owns their home jointly and files a joint bankruptcy can protect up to $100,000 in home equity. The Bankruptcy Court charges a filing fee to start a bankruptcy case.

Sale of Your Home

The price bid at a foreclosure auction is often no more than the amount you owe on the mortgage. If the auction sale price is less than the amount you owe, you could be liable for a "deficiency judgment". The lender will almost always cooperate in letting you sell the home privately while the foreclosure is pending. However, you would have to find a buyer before the foreclosure sale date. The bank is much more likely to wait to finish the foreclosure if the bank thinks you are really trying to sell your home quickly.

Timeline for Foreclosure

If you don't answer the complaint, a foreclosure judgment could be given to the court at any time after your 20 day answer period has run out. Realistically, it will probably be about two months after you are served with a complaint before the judgment is signed by a judge. The judgment appoints a referee to conduct the foreclosure sale. Notice of the sale must then be posted and published at least 28 days before the date of sale (See Real Property Actions and Proceedings Law (RPAPL) §231). If the sale is improperly conducted, it can be set aside within a one year period after the sale. You have the right to bid at the sale yourself, if you have money to pay the price you bid. After the sale, the referee will execute a new deed to the property to the purchaser at the foreclosure sale. The purchaser is often the bank. After the sale the, referee makes a report back to the court, which includes the price paid, and whether the former owner owes a deficiency judgment or is due a refund of any surplus between the amount due to the lender and the amount of the sale.

How the Bank Takes Your House

Under §221 of the RPAPL, if a mortgage foreclosure judgment orders the sale of your house or land, or confirms the sale, it can also order the delivery of possession of the property to the new owner. After the sale, if you were served with the judgment as well as a copy of the new deed to the property and you refused to leave, then the new owner could immediately get a court order directing the sheriff to remove you from the house. Otherwise, the new owner must give you ten days notice to leave, and file an eviction petition in court if you do not move out.

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(c) Legal Assistance of Western New York, Inc.

This article provides general information about this subject. Laws affecting this subject may have changed since this article was written. For specific legal advice about a problem you are having, get the advice of a lawyer.  Receiving this information does not make you a client of our office.