New York Judicial Foreclosure
A New York judicial foreclosure is a legal process in which the trustee of a bank holding a mortgage forfeits the ownership of the property in foreclosure to the court. At the time of the judgment, the trustee is legally prohibited from selling the property at auction and can only sell the property 'in-lieu' of the judgment by way of a Deed of Trust. If you are contacted by one of these creditors, it is important to know and understand that you will never be compensated for the amount of the default judgment.
There are two types of New York judicial foreclosure processes, judicial sale and summary judgment. The first involves an extended lawsuit in which the lender attempts to redeem the property for the amount of the loan. If this cannot occur, the trustee issues a summary judgment that authorizes the lender to sell the property at auction. In New York, note holders cannot be awarded a preliminary injunction until after a summary judgment has been issued.
In judicial foreclosure actions, the trustee sells the property in a civil proceeding, referred to as a "settlement." The title to the real estate is transferred to the lender by a judge during the course of the case. If the borrower has failed to make payments in the prescribed time frame specified in the loan agreement, or has failed to respond to repeated requests for payment, the trustee issues a deficiency judgment against the borrower. The court then decides whether the balance of the debt is owed to the lender, and orders the sale of the property. If the balance is not paid, the borrower has no other option but to repay the deficiency.
If the lender fails to pay the debt, a judge will issue an order that requires the borrower to pay the remaining amounts due under the foreclosure agreement. If the defendant does not respond to the initial demand, other options may be discussed with the referee. If these efforts to settle the debt do not result in an acceptable agreement, a final judgment is issued by the referee.
A judicial sale typically occurs after the completion of a short sale between the lender and the borrower. Once the lender accepts the settlement offer, the foreclosure sale is completed. The proceeds of the sale are given to the trustee. If the borrower files a challenge of foreclosure, the court may postpone the sale to allow time for the negotiations between the parties.
The procedure for obtaining a summary judgment in New York is different than in other states. If the plaintiff fails to obtain a summary judgment, the defendants can still pursue foreclosure. A New York judicial court will issue a written order called a "statement of facts." The statement of facts includes the names and addresses of both parties, a detailed account of the transactions leading up to the foreclosure, the name of the foreclosing lender, and the date the foreclosure took place. The court will also order a creditors' exam which is a comprehensive examination of each party's claims.
After the statement of facts has been filed, the parties are ordered to attend a conference. At the conference, the lawyers will discuss the arguments presented by the parties and reach an agreement to stop the judicial foreclosure action. If no agreement is reached, the case will be continued to a judge. At the end of the conference, the court will issue an order approving the New York judicial foreclosure sale. The proceeds from the sale will be held by the trustee who pays the mortgage company. If no payments are made, the creditors will be held in contempt of court.
There are several ways for a New York judicial foreclosure auction to be completed. The parties can either opt to have a summary judgment or a bench trial. If a summary judgment is not granted, either party can try a bench trial. In New York, only one party is required to apply for a court date. The other mortgage company must file a showing of how much money is owed to the lender.