New York Foreclosure Prevention Tips 2020

If you’re experiencing difficulty with making your mortgage payments, help is available. However, you need to take action now! If you ignore the problem you may lose your home to foreclosure, possibly affecting your ability to qualify for credit or to rent another home in the future.

You may feel embarrassed to discuss your situation, but the worst thing you can do is nothing. Today, tens of thousands of New York families are in foreclosure, while many more struggle to make their monthly mortgage payments, so you’re not alone.

There are many programs and solutions that can help you avoid foreclosure. Some of them change the terms of your loan, either until you get back on your feet, or forever. Some solutions give up your home but avoid more debt.

What is Foreclosure?

Foreclosure is the legal action a lender takes against you when you are unable to pay your mortgage.

If you’re unable to pay off the outstanding debt, negotiate a mortgage modification, or sell the property through a short sale, the property goes to auction. If the property does not sell, the lender takes possession of it, evicts you and then resells the home.

How do Foreclosures work in New York?

A foreclosure in New York takes, on average, over two years, and there are many steps that must be taken before a home can be foreclosed upon.

It's important to keep in mind that most foreclosure filings don't reach a foreclosure sale. In New York City, only about 20% of properties in foreclosure are sold through an auction or transferred to bank ownership.

Sometimes a foreclosure is simply unavoidable, if a loan modification, a short sale or deed in lieu are not available to you, New York is a judicial foreclosure state. This means that the lender who holds your mortgage must file a lawsuit against you in court to enforce its lien against your home if you fail to make payments on the loan.

What should I do if I'm behind on my mortgage?

First thing you should do is immediately communicate with your lender. As soon as you realize that you are going to have trouble making your mortgage payments, contact them and explain your financial difficulties.

Be prepared to discuss:

• Why you are unable to make your payment.

• Whether the problem is temporary or permanent.

• Details about your income, expenses, and other assets like cash in the bank.

This gives them the opportunity to work with you to create a plan. Do not stop paying your bills, and do not wait until you cannot make payments before you act. Though you may feel scared or embarrassed, immediately begin working with your lender to avoid foreclosure on your home.

When you and the lender talk about ways to avoid foreclosure this is called loss mitigation. The sooner you work with the lender the better, since negotiating a workable deal becomes more and more difficult as time passes and arrears add up.

While you’re in loss mitigation, make sure you are opening all of the mail you receive from your lender. It will contain valuable information about repayment options.

As the process goes on, you will receive important mail with legal notices. Failing to read the mail will not prevent a foreclosure action.

Next, you want to start looking for ways to increase income; either by cutting back on other expenses or part-time work; anything to increase the amount you have available to make your mortgage payments.

While this may not give you all the necessary funds needed to solve your problems, it will send a strong message to your lender that you are serious about keeping your home.

What options will help me keep my home?

For borrowers with FHA-insured loans, The FHA provides, as part of its insurance contract with lenders, loss mitigation actions the lender must evaluate and take, when appropriate, to reduce financial losses on loans in default.

Your lender needs information from you to fully evaluate these options. If you want to keep your home, talk to your lender about available workout options for home retention.

Special Forbearance. Your lender may provide a temporary reduction or suspension of your payments to buy you some time. Then you may be offered a payment plan so you can pay back the missed payments a little at a time until you are caught up. An extended forbearance period may be provided to unemployed borrowers who are actively seeking employment.

Mortgage Modification. A modification is a permanent change to your loan through which the overdue payments may be added to your loan balance, the interest rate may be changed or the number of years you have to pay off the loan may be extended.

Partial Claim. In a Partial Claim, a borrower receives a second loan in an amount necessary to bring the delinquent loan current. The loan is interest free and does not need to be repaid until you pay off your first mortgage or sell your house. This option is only available to borrowers with FHA-insured loans. However, if you have a conventional loan, ask your lender if they offer an “advance claim.”

FHA-Home Affordable Modification Program (FHA-HAMP). This option combines an enhanced partial claim with a loan modification. Under the FHAHAMP, the partial claim loan will not only include any amounts necessary to bring your mortgage current but may also include an amount to reduce your existing loan balance by up to 30%. The reduced loan balance will then be modified to lower your monthly mortgage payment to an affordable level.

As described above, the partial claim loan is interest free, but must be repaid when you pay off your first mortgage or sell your house. To qualify for any of these options, you will need to provide your lender with current information about your income and expenses. Also, your lender may require that you agree to a payment plan for three or more months to demonstrate your commitment before you are approved for a modification or partial claim.

What options do I have if I can't keep my home?

If your income or expenses have changed so much that you are not able to continue paying the mortgage even under a workout plan offered by your lender, you should consider the options below.

Pre-foreclosure sale. With your lender’s permission you can offer your house for sale and sell it at fair market value even if the amount you receive from the sale is less than the amount you owe. If you meet certain conditions, you may be eligible to receive relocation expenses.

Deed-in-lieu of foreclosure. As a last resort, you may be able to voluntarily give your property back to your lender. If you leave the property clean and undamaged you may be eligible to receive relocation expenses.

There could be income tax consequences to any plan that reduces the amount of debt you owe so check with a tax advisor before accepting these workout options.

We specialize in working with homeowners who are in similar situations.  We can purchase your home fast. Whether it’s making up your back payments and taking over your loan; working with the bank to complete a short sale, or paying all cash, we help you consider all your viable options.