Prior blog posts have discussed the legal steps required to foreclose property in New York State. Often, our firm will encounter a foreclosure case that has been in litigation for many years. In fact, it is entirely possible for a foreclosure matter in New York to take between five and ten years from the commencement of an action to the final sale of the property at auction. Even after the final sale, there may be additional landlord-tenant litigation involving the owner or tenant being evicted from the foreclosed property.
This post will discuss the legal ramifications of a delay in a foreclosure procedure. Foreclosure cases can be delayed for many reasons. Common reasons are court backlog, which may involve a Judge taking up to a year to render a decision on a motion, or simply failure of the lender or their attorneys to expeditiously file the various necessary motions in order to advance the case. Experienced counsel for the defendant may also further delay the case’s progress by interposing legitimate defenses to the action, such as a lender’s failure to provide the correct notices to the borrower as required by law.
As a result, the case may take years to resolve itself. What is the effect of such a delay? The first effect is that if the borrower is residing at the property, it allows her time to arrange for new living arrangements. If there is insufficient equity in the property, and the borrower feels that ultimately, it will be sold at an auction, any delay will allow her to continue living at the premises while the case plays out in Court. Even after the property is sold, the new owner must bring separate legal proceedings in order to evict any persons living at the premises. Our attorneys may be able to negotiate with the new owner to give the former owner sufficient time to obtain a new residence and arrange for movers. We have even successfully negotiated for the new owner to pay the prior owner’s moving expenses in order to have the property vacated.
Extended court proceedings may also allow the defaulting borrower sufficient time to find a buyer for the property, if there is sufficient equity. For example, let’s say that the borrower owes $400,000.00 on a mortgage, and then defaults on his payments. The house is valued at $500,000.00. The borrower should be able, with assistance of counsel to delay any Court proceedings to allow him sufficient time to market and sell the property, and use the sale proceeds to pay off any outstanding loan. Upon payment, the foreclosure case will be dismissed by the Court after motion brought by the plaintiff. This will allow the borrower to “move on” and may prevent a negative impact on his credit rating, as the loan will be marked as “paid in full” as opposed to being foreclosed.
Another possibility is that the homeowner does not live at the property, and decides to rent the property to a third party during the foreclosure process. In that case, the homeowner generally may continue to collect rent from the tenant until the sale of the property at auction.
Finally, if the delay in litigating the foreclosure case is mostly due to the actions of the foreclosing lender, the borrower’s counsel may request that any interest accruing during the period of the delay be waived. New York case law has confirmed that the Court has the power to order that interest accruing due to the lender’s delay in prosecuting a foreclosure case may be waived and not charged to the borrower. This waiver of interest may result in a lower amount due to the lender, and may give the borrower sufficient equity to sell the property to a third party, or, with the consent of the lender, to have a short sale.
Our firm has extensive experience in defending foreclosure cases on behalf of borrowers, and invites borrowers who may have potential default issues to contact one of our attorneys to discuss same.