Our firm frequently handles defenses for clients whose property is in foreclosure. It is possible, for various reasons, that such an individual may eventually be in a position to pay off or reinstate the mortgage loan in question. There can be many reasons for this to occur. For example, let’s say a homeowner encounters financial difficulties, and, as a result, defaults on her mortgage. As prior blog posts have explained, the legal process to foreclose a property may take several years. Potentially during this period of time, the property owner may inherit a large sum of money from a relative. She is now in a position to either pay off or reinstate the loan.
Another example may be where the homeowners are a couple who are going through a divorce. They may be arguing about money matters and cannot agree on whether to pay their mortgage, or to sell the property and move into separate residences. One of the spouses may have already moved out, and may refuse to pay the mortgage as a result. While they are going through legal divorce proceedings, the property may go into foreclosure as a result of their failure to make payments. It is possible that in resolving their divorce action, the parties agree that one of the spouses is to pay off the mortgage in full, with the other spouse receiving full title to the house as part of the settlement.
Assuming that there are now sufficient funds to pay off or reinstate the mortgage, what happens next? The first step is to have experienced legal counsel contact the lender, or their attorneys. Both a payoff letter and a reinstatement letter should be requested. These are written documents which will detail the exact sum due in order to pay off the mortgage in full, or to reinstate the mortgage and resume making regular payments. These documents will include all sums due to the lender, such as principal and interest, late fees, attorneys’ fees, and any taxes or other fees which the lender has advanced on behalf of the borrower. Importantly, the letter will also state a date through which the payoff or reinstatement figure is effective. After that date, the amounts may change, as additional interest or property taxes may become due.
The next step is to obtain certified funds to send to the lender or their attorneys. These funds should be in the form of a bank or official check, as lenders will not accept personal checks for payoff or reinstatement purposes. The borrower’s attorney should send these checks to the proper party by reliable courier, such as Federal Express.
Once the funds are received by the lender, the lender should then notify their attorneys that the loan has been paid in full, or has been reinstated. Either way, any pending foreclosure litigation should be discontinued. Under New York law, if a foreclosure action is to be discontinued, the plaintiff (the party who brought the case) must make a motion with the Court to end the action. Of course, the borrower (the defendant) will not oppose such a motion, and the Court will then issue an order discontinuing the action and cancelling any notice of pendency that may have been filed with the County Clerk. Counsel for the borrower should monitor the Court to make sure the lender’s attorney has taken all of the necessary legal steps to end any pending litigation.
If the loan has been fully paid, the lender should also file a Satisfaction of Mortgage with the County Clerk. If the loan has simply been reinstated, the borrower should make sure that they receive updated statements from the lender that should show the amount of the new payments due, and when they are to be paid.
Our firm handles foreclosure defense and has extensive experience in resolving such litigations in an expeditious manner.