When Foreclosure Threatens: Your Comprehensive Guide to Loss Mitigation Options That Can Save Your New York Home

Facing foreclosure can feel overwhelming, but New York homeowners have more options than they might realize. Loss mitigation—the process of working with your mortgage servicer to find alternatives to foreclosure—offers multiple pathways to keep your home or minimize financial damage. Understanding these options and knowing how to navigate the system can mean the difference between losing your home and securing a fresh start.

Understanding Loss Mitigation: Your Legal Rights in New York

You have the right to explore “loss mitigation” options that may allow you to keep your home and avoid litigation. The bank or mortgage servicer is required to help you understand your loss mitigation options. If you have submitted a completed loss mitigation application, your bank or mortgage servicer must finish its review of your application before proceeding with the foreclosure suit.

Under federal law, the servicer usually can’t officially begin a foreclosure until you’re more than 120 days past due on payments, subject to a few exceptions. This 120-day period provides most homeowners ample opportunity to submit a loss mitigation application to the servicer. Additionally, if the property is an owner-occupied, one-to-four-family dwelling, or a condominium unit, New York law requires the lender or servicer to send a notice to the borrower 90 days before starting the foreclosure that includes information about government-approved housing counseling agencies.

Primary Loss Mitigation Options Available to New York Homeowners

Loan Reinstatement

Pay arrears, become current on the loan: You agree to pay the lender the entire past-due amount, plus any late fees and/or penalties, by a certain date. This option may be right for you if paying your mortgage is a temporary problem. New York law provides that the homeowner may reinstate the loan at any time before final judgment. The homeowner can also pay the arrearage after judgment but before the sale, and the proceedings will be stayed (postponed).

Loan Modification

Loan modifications can permanently restructure your mortgage terms to make payments more affordable. You may qualify for a HAMP modification if your home is your primary residence, the amount you owe on your first mortgage is equal to or less than $729,750, you got your mortgage before January 1, 2009 and you are paying more than 31% of your current gross income on your first mortgage including principal, interest, taxes, insurance and homeowner’s association dues.

Repayment Plans

The lender may agree to a repayment plan. If you do not qualify for a permanent modification and have only missed a few payments, you may qualify for a temporary solution. These plans allow you to catch up on missed payments over time while continuing to make current payments.

Forbearance

Unemployed borrowers may also be entitled to have their mortgage payments temporarily reduced for 3 to 6 months while they look for a new job. This temporary relief can provide breathing room during financial hardship.

Alternatives When Keeping Your Home Isn’t Possible

There are alternatives to foreclosure that can settle your debt but do not allow you to keep your home. These can be good for people who are divorcing or no longer want to own a home together or know that they do not qualify for loan modification or the house is worth less than the debt.

Short Sale

If you are unable to sell the house for an amount that covers your debt because your debt is more than the value of your home, lenders will sometimes agree to a short sale. The lender then takes the proceeds from the sale and forgives the remaining debt. This is commonly used when a home owner is experiencing a hardship and has been unsuccessful in selling the home at market value or an amount that covers what is owed. Servicers may suspend foreclosure action for a reasonable period of time to allow the homeowner to review and close an approved transaction.

Deed in Lieu of Foreclosure

To avoid foreclosure, you agree to turn over the deed to your home to the lender. In exchange, the lender agrees that you no longer owe any additional debt. This allows you to walk away from the home without a Deficiency Judgment, and without a foreclosure sale on your credit report.

Working with Servicers: The Communication Process

In most cases, federal mortgage servicing laws require the servicer to contact you (or attempt to contact you) by phone to discuss foreclosure alternatives, called “loss mitigation” options, no later than 36 days after a missed payment and again within 36 days after each following missed payment. No more than 45 days after a missed payment, the servicer must let you know in writing about loss mitigation options that could be available and assign personnel to help you.

When working with servicers, it’s crucial to maintain detailed records of all communications, submit complete applications promptly, and respond to requests for additional documentation quickly. For their part, the homeowner will need to provide documents to the lender before the negotiations get started. These resemble the documents needed for loan modification applications.

Professional Assistance and Foreclosure Prevention

A foreclosure is a lawsuit, and homeowners should seek assistance from an attorney or housing counselor in exploring potential legal defenses to the suit. The Law Office of Ronald D. Weiss, P.C., established in 1993, specializes in foreclosure defense and debt solutions for homeowners throughout Long Island, New York City, and Westchester County.

With over 30 years of experience in bankruptcy and foreclosure law, Ronald D. Weiss P.C. offers comprehensive services including foreclosure defense, mortgage modifications, and debt negotiations. The firm takes a personalized approach to each case, examining all available options including loss mitigation alternatives, bankruptcy protection, and litigation strategies to protect homeowners’ rights.

Available Resources and Support

New York provides several resources for homeowners facing foreclosure:

• New York’s Homeowner Protection Program (HOPP), which connects with housing counselors and legal services at no cost. Call the HOPP hotline at (855) 466-3456 or visit homeownerhelpny.com.
• 24-Hour assistance is available toll-free on the HOPE NOW hotline at 888-995-HOPE (888-995-4673). HOPE NOW is an alliance of HUD approved counseling agents, servicers, and investors that provide free assistance.
• New York City has established a Mortgage Assistance Program (MAP) to keep households at risk of foreclosure in their home. MAP loans can be for amounts of up to $25,000 and are targeted to certain neighborhoods in NYC most affected by the foreclosure crisis.

Taking Action: Your Next Steps

From the 90-day preforeclosure notice to settlement conferences and defenses under the Foreclosure Abuse Prevention Act, homeowners in New York have powerful legal rights that could help them avoid foreclosure or stay in their homes longer. New York has one of the longest timelines in the country, so you should have plenty of time to explore ways to avoid foreclosure.

The key to successful loss mitigation is early action. Don’t wait until you’re months behind on payments to explore your options. Contact your servicer as soon as you anticipate difficulty making payments, gather all necessary financial documentation, and consider consulting with experienced foreclosure defense attorneys who understand New York’s complex foreclosure laws.

Remember, you have the right to stay in your home and the duty to maintain your property unless and until a court orders you to vacate. To prevent this outcome, stay in your home and carefully review and respond to documents you receive from the plaintiff or the court in your foreclosure case. With the right strategy and professional guidance, many homeowners successfully navigate the loss mitigation process and save their homes.