The state of New York has the lowest rate of homeownership in the country at just 50%. This is partly attributed to the high cost of living. Many people just cannot afford to own property in the Empire State. But that's not to say that state leaders have dropped the ball. New York has some of the strongest protections for homeowners facing foreclosure. Buyers interested in purchasing a home in New York may sometimes seek special financing options and hard money loans are becoming a popular option for many. Hard money loans require the borrower to use their home or other owned real estate as collateral to secure the funding. Small group or individual investors can fund these loans faster than most typical mortgages from big banks and with less paperwork as well.
Foreclosure Laws in New York
Some states favor one foreclosure process or the other - allowing lenders who seek foreclosure settlements to manage their process through the courts (judicial) or outside of the court system (non-judicial). New York does not allow for both. All foreclosures in the state of New York must go through the court system. This means a lender must file suit, follow state requirements for notice and filing deadlines and that borrowers facing foreclosure have some built-in protections or at the very least, time delays, to help them find a solution other than losing their home to foreclosure.
Property Redemption after Foreclosure Sale
In some states, the borrower can redeem (repurchase) the home within a certain period of time after the foreclosure. However, there is no redemption period after the sale in New York.
Deficiency Judgments in New York
When a home is sold in foreclosure, if it does not bring in enough money to cover monies owed by the borrower, then the lender can seek what is called a deficiency judgment that forces the homeowner to continue paying on the debt. In New York, it is possible to get a deficiency judgment if the borrower is served the complaint and summons personally, or if the borrower appears in the foreclosure action. To obtain the deficiency judgment, the foreclosing party must make a motion with the court within 90 days of the final sale N.Y. Real Prop. Acts. Law § 1371.
The amount of the deficiency is limited to the total amount of the debt minus the higher of the fair market value, or the sales price. N.Y. Real Prop. Acts. Law § 1371.
Deed in Lieu of Foreclosure
Some homeowners in New York may decide that they do not want to fight a pending foreclosure because they simply cannot afford the payments. In these cases, a Deed in Lieu of Foreclosure might be offered to the lender. This is a special agreement that is made between a delinquent homeowner and the mortgage lender. Both sides must agree to the terms, but it usually comes down to the homeowner volunteering to move out, giving possession over to the lender instead of forcing a court battle over the pending foreclosure sale. This option is also sometimes called "cash for keys" because homeowners can also negotiate a small financial settlement to help cover the unexpected costs of moving out of the home. This option saves the lender time and money on an expensive foreclosure process and can also save the borrower time and money too. Depending on the agreement between the two parties, there can sometimes be a deficiency judgment, meaning the homeowner still has to pay some fees or back payments. But in most cases, a Deed in Lieu of Foreclosure agreement leaves both parties whole, walking away without additional dispute.
Grace Period Notice
New York has a grace period built into the foreclosure process, giving homeowners who fall behind on payments a full three months to catch up before an actual foreclosure process can begin. They also help homeowners by providing a foreclosure settlement conference, after any foreclosure process begins for the purpose of helping homeowners and lenders come to an agreement that works for both parties and keeps people in their homes when possible.
Protections for Military Members
New York has a state law that is similar to the Federal Service Members Civil Relief Act that applies to service members on federal active duty or state duty pursuant to an order of the governor. N.Y. Mil. Law §§ 301 through 328. Among other things, it provides that a service member may apply to the court for a stay of proceedings (a postponement) in a foreclosure action if they own the property before they started military service, still own the property and if their failure to keep up with payments is related to their military service in some way. N.Y. Mil. Law § 312.
High Risk Mortgage Protections
New York also has special protections in place to help homeowners with what are called high risk loans, those with a particularly high interest rate, a large balloon payment schedule or that were provided to buyers with negative credit history. New York's high-cost home loan statutes prohibit, among other things, balloon payments under certain circumstances, negative amortization, and mortgage provisions that increase the interest rate after default. N.Y. Banking Law § 6-l, N.Y. Real Prop. Acts. Law § 1302.
Additional State Laws
The maximum legal interest rate on a loan in New York is 16%. While many jurisdictions set statutory limits on interest rates, they are not always enforceable. Why? Consumers often agree to rates higher than the limit and in doing so, waive the protections. This often renders legal interest rate limits to little more than general guidelines. In any event, New York's interest rate limit is 16 percent.
New York is a homestead state. Under New York's homestead protection law, the amount property owners may declare exempt varies based on county location and range from $75,000 to $150,000. The exemption amount is doubled for married couples, which can be as much as $300,000 for a couple in Suffolk County, for example.
When you file for bankruptcy, the homestead exemption will automatically be figured into your case (so you don't have to file a separate homestead declaration). You may claim homestead exemption under New York or federal law, but not both. The state does not provide any additional homestead exemptions for property that is held as a tenancy in the entirety.
Lender Licensing Requirements
Article 12-E of the New York Banking Law, which went into effect on July 11, 2009, requires all individuals (with limited exceptions) who engage in the business of a mortgage loan originator with respect to New York residential real estate, to obtain a license from the Superintendent of Banks.
The New York State Department of Financial Services uses the Nationwide Mortgage Licensing System (NMLS) as the initial step in the Mortgage Loan Originator license application process.