Nationally, foreclosures have dropped significantly over the last few years. However, the lingering effects of the housing-market collapse, which started almost a decade ago, will continue in 2017 and beyond. In fact, approximately one third of all civil cases in New York State courts are foreclosure actions. In 2015, more than 40,000 new foreclosure actions were filed throughout the state (which is only a few thousand fewer cases than were filed at the height of the housing collapse in 2009). Notably, 60 percent of New York State’s foreclosure actions were commenced in four counties in the metropolitan area, including Brooklyn and Queens.
The thought of losing a home can be daunting. However, foreclosure actions have wide-ranging resolutions that do not always result in the loss of the home. Here is a list of potentially viable alternatives to succumbing to foreclosure:
1. LOAN MODIFICATION
You may be able to conduct negotiations with your lender to complete a loan modification to modify the terms of your agreement with your lender—such as the payment amount, interest rate, length of the loan, etc.
2. FORECLOSURE DEFENSE LITIGATION STRATEGY
You can take an aggressive foreclosure defense approach against the allegations of the lender – challenging the validity of the foreclosure proceedings and the lender’s compliance with regulations in initiating the foreclosure proceeding. This includes, among other things, questioning whether the lender violated any of your rights (predatory lending practices) or whether there are procedural violations with the foreclosure.
3. CHAPTER 13 BANKRUPTCY
Filing for Chapter 13 bankruptcy will place an automatic stay on foreclosure proceedings. This option can provide you with time to figure out a resolution and may allow you to keep your home. If you stay current on your loan payments and make up the arrears through your Chapter 13 bankruptcy plan, the lender cannot foreclose.
4. SHORT SALE
A short sale may enable you to sell your home for less than the balance of your loan. However, the short sale must be negotiated and approved with your lender in advance to ensure you are not held accountable for the difference between the sale and your loan balance.
5. DEED IN LIEU OF FORECLOSURE/CASH FOR KEYS
Deed in Lieu of Foreclosure and Cash for Keys are options wherein a homeowner agrees to give back the property. With a Deed in Lieu of Foreclosure, the homeowner agrees to give back the home without requiring the bank to complete a formal foreclosure proceeding. Cash for Keys is a similar option, except, in this case, the lender offers a cash incentive for the homeowner to give back the home and leave it in good condition without waiting for the entire foreclosure process to conclude. These options can be advantageous to a defaulting homeowner, as they allow for forgiveness of the remaining debt, avoid the publicity of a foreclosure, and have less of an impact on his or her credit. Lenders typically prefer these options, as they reduce the time and expense of litigating a foreclosure proceeding to conclusion in New York.