The Unique Foreclosure Process in New York and How Long it Takes

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The unique foreclosure process in New York and how long it takes. The foreclosure process in New York can take multiple years with ample opportunities for borrowers to ask for delays. This is primarily due to New York being a judicial foreclosure state with very liberal minded courts that have always tended to lean and to be highly sympathetic towards borrowers versus lenders.

How foreclosures are different in New York versus other states? New York is the judicial foreclosure state which means the lender must sue the borrower in order to foreclose on the property. This is generally advantageous to the borrower as it extends the amount of time that the borrower can stay in the home before the case is either settled or the home is foreclosed. As you can imagine, borrowers generally don't pay their mortgage, payments, their property taxes, their home insurance premiums, their common charges or co-op maintenance fees during the foreclosure process. This means borrowers get to essentially live for free for an extended period of time in a judicial foreclosure state.

Meanwhile, lenders have to advance payments for this housing expenses throughout this process. In contrast, many states like California or Texas are non-judicial foreclosure states which means the lenders does not need to sue and go to court and get a court order to require process to foreclose on a property. For example, in Nevada, which is a non-judicial foreclosure state, if you don't pay your mortgage the sheriff used to be able to come and simply padlock your house 30 days later. Now, I know that sounds extreme but of course regulations have softened in favor of borrowers. Even if Nevada has the great financial crisis since 2007 to 2008. But regardless the process is still significantly more streamlined there in a non-judicial state versus a judicial state like New York.

The following infographic on the screen will illustrate which state are judicial and which state are non-judicial in the United States when it comes to foreclosures. Note that some states can be both judicial as we as non-judicial offer depending on the mortgage or the deed has language that allows a non-judicial foreclosure. For example, a power of sale clause. Furthermore, and for example, even though most foreclosures in Nevada today are of the non-judicial variety i.e. conducted buyer trusted for the direction of the lender, sometimes a lender will have to get a court order foreclosure if they will have the proper authority within the deed of trust.

How long does the foreclosure process take? The foreclosure process in New York can take 3 to 5 years on average for a contested foreclosure. Meaning that the borrower responded in any format. If the borrower doesn't bother to respond to the notices and the foreclosure goes unchallenged, then the process can take as letter as 6 or 7 months which is actually considered extremely fast for New York. A borrower may get to keep the house free if the process takes longer than 6 years. A contested foreclosure is not only extremely costly for a lender due to the lender having to advance housing expenses on behalf of the borrower during all of these years but because the statute of limitations applies and kicks in at 6 years after the borrower's last payment.

This is because lenders typically accelerate the loan which means they ask for a full payment on the date the summons and complaint is filed. Therefore, the statute of limitations applies to the entire loan amount after 6 years. Don't believe it? We've heard of a borrower in Queens who is able to drag out the foreclosure process for more than 6 years then they were able to raise the statute of limitations defense. The bank was at a complete loss of what to do and the mortgage was strip from the property through either a quite title action or a quite title counter claim. The potential to use the statute of limitation as a defense is why borrowers should reconsider making payments again during the middle of the foreclosure process. The same logic applies to eviction cases where hoard over tenants should seriously reconsider making any payments again during the eviction process.

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