Foreclosure

August 11, 2016

Selling a New York Property While in Foreclosure

Prior blog posts have discussed a “short sale” of a property in foreclosure. A short sale is when the house is worth less than the mortgage owed to the lending institution, and the lender agrees to accept less than the full amount owed when the transaction takes place. However, a situation may also arise when a house is worth more than the loan balance, or when the amount owed is small enough that the seller may decide to pay the difference in order to sell the property to a third party. This post will discuss legal issues related to these circumstances.

Many of our firm’s intend to sell their houses or other property in foreclosure. They have listed their properties with a real estate agent, and are confident that the selling price will exceed the amounts owed on the property’s mortgage. In that case, the first legal recommendation is to have an attorney file an answer to the foreclosure complaint in the appropriate court, including all legal defenses . This will allow the homeowner additional time in which to find a buyer for the property while the foreclosure process plays out in Court. Mandatory settlement conferences for foreclosure actions may also further delay a lender’s obtaining of a judgment of foreclosure and sale, allowing more time to market and sell the property.

Once a buyer is procured, it is important that the seller’s attorney immediately prepare a Contract of Sale. Assuming all parties then execute the contract, the buyer’s downpayment should then be deposited in the attorney’s escrow account. The next step would be for the seller’s attorney to contact the attorneys handling the foreclosure for the lending institution. The attorney should provide copies of the fully signed contract, together with proof of the downpayment deposit. At this point, the attorneys for the lender may agree (although legally, they are not obligated) to put a “hold” on any foreclosure litigation, pending the closing of the sale of the property. The reason for this is that at the closing, the lender will be paid in full. Therefore, it is usually not cost effective for a lender to continue to pursue a judgment of foreclosure in Court once there is a signed contract and downpayment.

June 7, 2016

Deficiency Judgments in New York Foreclosures

By Weiss & Weiss

Previous blog posts have discussed foreclosures in New York State. Many of our clients own either residential or commercial property and may not be able to make their mortgage payments. They may become subject to a foreclosure lawsuit brought in the appropriate Supreme Court, in which the lender seeks to foreclose on its mortgage and take over ownership of the property in question.

However, our firm is often asked what happens after the lender takes ownership of the property from the borrower. This is usually done after a public foreclosure sale of the property before a court-appointed Referee. The Referee will then prepare a Referee’s Deed, in which ownership of the property is transferred from the borrower to the entity which was the successful high bidder at the foreclosure sale. The Referee’s Deed is then recorded with the County Clerk’s Office in the county in which the property is located.

Does the foreclosure action end at that point? Generally the answer is yes, but not always. The lender, which can be either an institution such as a bank or credit union, or an individual, may seek a deficiency judgment against the borrower after the foreclosure sale is finished. Whether this happens is dependent on the successful bidder at the foreclosure sale. Before the public auction, the lender will make public the amount which the borrower owes on the property. This amount will include all principal and interest on the loan being foreclosed, the costs of the foreclosure, including attorney’s and referee’s fees and court costs, as well as any other expenses that the lender incurred in foreclosing the property. Let’s assume that this amount is $500,000.00. Any third-party bidder (anyone who is not the lender) for the property must bid at least this amount for the property. In the example given, the bidding would have to start at $500,000.00. Assuming someone believes the property is worth at least this amount, the highest bid which exceeds $500,000.00 would pay this amount to the Referee and become the owner of the property. The first $500,000.00 of the successful bid would be paid to the lender, with any remaining sums going to any creditors of the borrower who have appeared in the foreclosure action, and any surplus after that paid to the borrower. In such a case, there would be no deficiency judgment.

March 10, 2016

Preserving Real Estate Assets for the Defaulting New York Homeowner

By Weiss & Weiss

It is not unusual for some of our clients to be presented with the following scenario. An owner of a single family house or apartment falls behind on his mortgage and his lender commences a foreclosure proceeding while a sale is pending. In an apartment scenario, the cooperative board pursues a maintenance default matter while a cooperative unit owner is actively attempting to sell the unit. These are not situations where a short sale is sought. Rather, significant equity exists. The anticipated sales proceeds will allow for the full payment of the balance of the mortgage loan or maintenance arrears due to the cooperative.

Another common component of these situations is that the lender or cooperative board is aggressively pursuing their claim, jeopardizing the owner’s ownership of the asset. For instance, if the lender forecloses on the mortgage, the homeowner will lose title to the property and have nothing to sell. If the cooperative default goes to its final conclusion, an auction of the unit (and eviction of the occupant) , the unit owner will likewise lose her ownership interest. These results should be avoided when the closing proceeds are more than sufficient to pay any outstanding amounts due. The goal of the attorney representing the homeowner is to encourage the lender or the cooperative board to delay its proceeding pending the sale of the property , at which time the lender or the cooperative will be paid in full for the monies owed. When a homeowner falls behind in payments due, he may claim to a creditor that he is trying to sell the home in an effort to stall proceedings. While it may be true that the homeowner is trying to sell the home, the following suggestions may make such a claim more credible to the creditor and convince them to delay the proceedings.

First, it is helpful to have a skilled attorney present this information to the creditor. Second, for sale by owner scenerios should not be used. Having a licensed real estate agent involved who has an active listing that can be shown to the creditor is convincing evidence that the home is actively for sale. Third, if there is a signed contract of sale with downpayment monies on deposit and also a loan commitment letter from the purchaser to deliver to the lender or cooperative’s attorney, such documents will show that the means to pay the past due balance will be imminently available. A new loan may be sought by the homeowner as another means to resolve the default. If these strategies are not effective, our attorneys may file an Order to Show Cause with the applicable Court, seeking a temporary restraining order curtailing the creditor’s right to pursue the activity until the sale occurs.

February 25, 2016

Mortgage Modifications in New York State

By Weiss & Weiss

Our firm is often called on to assist homeowners whose properties may be in foreclosure. This can occur when a person falls behind in their mortgage payments to a bank or other lending institution. Because of the high volume of such foreclosures in New York State over the past several years, additional safeguards have been added to the judicial process to protect people from losing their primary residence in a foreclosure case.

Prior blog posts have explained how New York State requires a mandatory settlement conference in most residential foreclosure matters. The main exceptions are cases involving a reverse mortgage, or situations in which the homeowner does not reside at the property being foreclosed, such as a second home or vacation house. Our attorneys will attend settlement conferences in Court to attempt to resolve outstanding foreclosures. Court referees, who meet with the parties in an attempt to resolve these cases, encourage lending institutions to offer mortgage modifications. The first step in the process is that the borrower must provide complete financial information to the lender (or, in most cases, their attorneys). This information usually consists of a standard Request for Mortgage Modification Form (RMA), copies of state and federal tax returns for the last several years, a hardship letter from the borrower explaining why they fell behind on their mortgage, proof of income, bank statements, and other financial records as the lender may request.

Once this information is provided, the lending institution will consider whether a modification is possible. Based on the borrower’s income and assets, as well as the value of the property in question, as well as the mortgage amount, the lender may offer a trial modification. The trial modification may reduce the interest rate on the original mortgage, and may also shift the past due payments to the end of the loan term, allowing a delinquent borrower to resume payments and have the property removed from the foreclosure process. In certain instances, the lender may even reduce the actual amount of principal owed on the mortgage.

September 25, 2015

Legal Issues Pertaining to Inspirational and Divisive Religious Leaders

By Weiss & Weiss

Pope Francis’ first visit to the United States has managed to inspire numerous people. Yesterday’s speech before Congress mesmerized all of those in attendance, regardless of their religious or political affiliation. The Pope’s message has been unifying to all witnesses, which is why many people have been so excited by his visit, even though many of us are not Catholic and may not agree with his specific positions.

What happens when a religious leader is divisive instead? This post will examine the legal ramifications when the leader of a religious institution is the source of conflict among congregants. It is not unusual for clients to consult us concerning disputes within their religious institutions.

In the event that the congregants choose to continue to worship together under the leadership of another clerical leader, steps may need to be taken to legally terminate the relationship with the spiritual leader. As we discussed in a prior post , the spiritual leader may be classified as an independent contractor or employee, depending upon the circumstances. An independent contractor may be dismissed more readily.

June 4, 2015

Foreclosure and Bankruptcy in New York

By Weiss & Weiss

A recent decision by the United States Supreme Court raises important issues for those whose homes are in foreclosure and are considering filing for federal bankruptcy protection. This case involved a borrower whose home was “underwater,” which means that the mortgage debt on the property (both a first and second mortgage) exceeded the current value of the home. In such cases, the bankruptcy counsel will often seek to have the second mortgage “stripped off,” that is, removed, so that it is no longer a lien on the property.

The Supreme Court ruled that, in such situations, the second mortgage could not be removed simply because the house was worth less that the total mortgage debt. This ruling will prevent such homeowners from having second mortgage loans (which are often in the form of home equity loans) discharged by the Bankruptcy Court in a Chapter 7 liquidation proceeding. This ruling protects banks that make second mortgages from having these mortgages dismissed in bankruptcy proceedings where the home currently has a negative equity.

Our firm handles many cases in which we defend homeowners who are in foreclosure. We are often asked what the effect of a bankruptcy filing would be on such a proceeding. The first effect of a bankruptcy filing is to freeze all current litigation against the person filing for bankruptcy, as well as all collection efforts on any debts. Therefore, if an individual is delinquent in their mortgage payments, a bankruptcy filing would suspend all collection letters, phone calls, and, of course, litigation relating to all debts, including mortgage debts. Failure to comply with the automatic bankruptcy stay may subject the lending institution to Court sanctions, including fines.

March 12, 2015

Foreclosure Settlement Conferences in New York State

By Weiss & Weiss

Our firm handles many cases in which the client is being sued for foreclosure of their property. In general, a foreclosure lawsuit involves a mortgage loan which has been recorded as a lien against real property, such as a house or condominium unit. Please note that cooperative apartments involve ownership of shares in the cooperative corporation, and therefore are not subject to the judicial foreclosure process.

Due to the large volume of foreclosures in New York in recent times, and the desire to protect homeowners, a law was passed in New York State several years ago requiring mandatory settlement conferences in residential foreclosure actions. This requirement does not apply to commercial foreclosures, nor to situations where the owner of the property being foreclosed does not reside at the property.

The purpose of this law is to attempt to resolve foreclosure cases before extensive litigation occurs. The law requires that, after the party foreclosing (the lender) files proof with the Court that the borrower was served with the foreclosure lawsuit, the Court must hold a mandatory settlement conference within sixty (60) days of such filing. In general, the Court will issue a written notice to all parties advising them of the date, time, and location of the settlement conference. It is important to advise your attorney if you receive such a written notice, so that they will be able to attend the conference on your behalf.

October 31, 2014

Happy Halloween: Haunted Houses, Zombie Houses, Ghosts and Other Scary Things

By Weiss & Weiss

Even Halloween gives rise to legal issues that may pertain to our blog readers. This blog post will address haunted houses, zombie houses, ghosts and other scary situations from a legal perspective.

Unfortunately, a crime, suicide or other unpleasant event may have happened in a house prior to sale. Such a house may be considered to be “haunted”. Does New York law require disclosure that the house is haunted to a potential buyer? The answer is no. New York is a caveat emptor state, meaning “let the buyer beware”. Psychological issues do not require disclosure. It is the buyer’s responsibility to conduct inspections, ask questions and develop her own opinion about the neighborhood, school district and conditions in the house. Once the buyer has accepted delivery of the Deed at the closing, she has no claim against the seller for property conditions except those that specifically survive the closing according to the contract between the parties.

The only exception to this concept is New York’s Property Disclosure Law . This requires the seller to complete an extensive list of questions detailing property condition, such as has there ever been an oil tank at the property, is the electrical system original and the like. If a seller does not provide the completed Property Disclosure form, a $500.00 credit is to be provided to the buyer at closing. Interestingly enough, in upstate New York, most sellers complete the Property Disclosure form, while in downstate counties typically served by our firm, most sellers opt to credit the buyer at closing rather than complete said form.

July 28, 2014

Keeping Landlord-Tenant Disputes Under Control

By Weiss & Weiss

Recently in the news is the rather gruesome story of a woman who was murdered and dismembered. Her body parts were discovered in Nassau and Suffolk Counties. Her neighbor was arrested for her murder and is being held without bail. According to the news story, the root of the conflict between the two women appears to have been a landlord-tenant dispute.

The accused murderer, Leah Cuevas, was pretending to be the landlord of the building in which the two women lived, after the actual owner passed away. Ms. Cuevas then attempted to collect the rent from the building’s tenants, and when fellow tenant Chinelle LaToya Thompson Browne refused to pay, she was allegedly murdered by Ms. Cuevas. Of course, most landlord-tenant conflicts do not end in this manner. This blog post will attempt to discuss the legal issues involved, although, as our firm does not generally practice criminal law, we will leave the more graphic issues to the criminal courts.

Often, a situation can arise where a person claims to be the owner and/or landlord of a house or apartment building and demands rent from the tenants. This can happen where the original landlord passes away without a will, or where the building is being foreclosed by a lender. There may be occurrences where a landlord cannot meet the carrying charges on a building, such as the mortgage and utilities, and simply “walks away” from their ownership. If the ownership is in a corporate name, the landlord may not be personally liable for the building’s debts, and does not dispute any foreclosure proceeding that may occur.

May 22, 2014

Enjoy Your Vacation Home this Memorial Day Weekend

By Weiss & Weiss

Memorial Day weekend is eagerly anticipated by many of our readers, especially this year after the harsh winter that we endured. Fortunate travelers expect to enjoy their vacation homes this weekend. As you head out for the weekend, we wish to remind you of certain legal issues pertaining to vacation homes.

Some vacation homes were financed by the use of reverse mortgages . Once the borrower dies or does not occupy the home for another reason, the lender may seek to collect the remaining unpaid principal balance, require the home to be sold or foreclose on the property. Since vacation homes are secondary homes, obtaining a mortgage modification, if necessary due to the financial circumstances of the borrower, is not a certainty. We are available to assist our clients in foreclosure defense should it become necessary.

Sometimes a vacation home is inherited by more than one adult child. In this case, maybe not all of the record owners contribute to the expenses of the house or even use the house. Our firm has been engaged in partition actions on behalf of its clients to alleviate this situation.