In order to stop foreclosure proceedings occurring the state of New York, homeowners need to be abreast of all applicable state and federal statutes governing foreclosure, as well as the specific terms and clauses contained within their own deed of trust or mortgage. There are a number of general and notable methods to prevent foreclosure, which may be feasibly options for a struggling homeowner, but almost all options will require working with your lender, using the assistance of an attorney, and possibly, seeking the counsel of an FHA counselor in your area.
Taking Advantage of Lender Assistance Programs
More often than not, lenders will actively seek to assist homeowners in preventing the loss of their home to a degree. Depending on the specifics of your lender agreement, whether it be a deed of trust or mortgage in New York, one of the following options may be able to alleviate eminent financial pressures leading to default and foreclosure, including:
- Loan modifications, which may adjust monthly payments, alter existing interest rates, extend the life of the loan, or turn a variable rate mortgage into a fixed rate
- Loan refinancing, which may consolidate outstanding mortgage debt into one smaller principal sum, with more favorable interest rates and other terms
- Forbearance requests, which if approved, will give a homeowner a temporary reprieve from making monthly payments on an existing mortgage or property held in deed of trust for a set period of time, ideally until financial stability is regained
Any of the aforementioned assistance programs are subject to lender approval, which is done on a case-by-case basis. The more cooperative and communicative a homeowner is with their lender from the onset of default, or even before, the more likely that these options will become available to a struggling homeowner.
Consider Government Counselors and Relief Programs
The best resource of information regarding foreclosure prevention, aside from dedicated legal counsel, is available free from federal foreclosure crisis counselors working within the local offices of the Department of Housing and Urban Development. These counselors are a consummate source of information regarding federal relief initiatives and other programs that may benefit a homeowner struggling to meet mortgage obligations. Some of the most notable federal programs available to eligible homeowners include the following:
- The HOPE for Homeowners Act: The Act provides immediate refinancing to eligible homeowners struggling under certain variable rate mortgages attached to a primary residence by turning these debt obligations into a fixed rate, thirty (30) year term mortgage, guaranteed by the FHA
- The Homeowner Affordability and Stability Plan: This federal initiative provides certain eligible homeowners with refinancing assistance through their lender
- The Mortgage Forgiveness Debt Relief Act of 2007: This Act, which alongside the Emergency Economic Stabilization Act of 2008, provides tax breaks for homeowners discharging debts from mortgages, which would have normally been taxable income under IRS codes
Consider Short Sale or Deed in Lieu of Foreclosure
If it appears that remaining in a given home is no longer financially feasible, homeowners should consider using an attorney to negotiate either a short sale or deed in lieu of foreclosure. While both these options involve the loss of one’s home, each option will erase existing mortgage or deed of trust debt obligations, while deficiency judgments liens, which are allowed and pursued in New York. Additionally, if sufficient equity has been accrued in a home or the appraisal value is high enough, a homeowner can sell their existing residence, pay off the mortgage in a negotiate lump sum, and use any remaining income from the home sale to find a new residence.
Short sale entails finding a prospective buyer willing to make an offer on your home. With the terms and amount of this offer, a homeowner will consult their lender and propose a short sale, which will use the proceeds of the home sale to cover outstanding debt, which may not be enough to cover the entire existing mortgage obligation. In turn, a lender will forgive the outstanding amount unpaid on a given debt.
In a deed in lieu of foreclosure, a homeowner will propose turning over the title or deed to their home in exchange for erasing all outstanding debt related to the property. This method prevents the blemish of foreclosure on one’s financial records, and allows a homeowner to cancel out all debt entrapments related to a given property.
Consider Bankruptcy to Relieve Primary Residence Debt
Another option to prevent foreclosure is through bankruptcy. By using either Chapter 13 or Chapter 7, a homeowner can immediately garner an automatic stay on creditor collections attempts, which will effectively stop a foreclosure for the time being. The following are some notable aspects of bankruptcy relating to foreclosure in the state of New York:
- Chapter 7 bankruptcy, which involves liquidation of assets and discharge of debts, can discharge the debt associated with a home, but will also result in the sale of the home to satisfy creditor claims. Federal homestead exemptions for Chapter 7 stand at $18,450 and New York Chapter 7 homestead exemptions are $10,000, with $20,000 being applicable for couples
- Chapter 13 bankruptcy, which involves consolidation of debts and reorganization, will allow a homeowner to consolidate all debts into one payment made to a bankruptcy trustee. A successful Chapter 13 filing can reduce to overall amount of money owed and adjust the terms of existing mortgage obligations entirely
Getting Legal Help to Stop a Foreclosure in New York
Homeowners really should consult with an attorney as soon as they recognize that their ability to remain in a given residence may be in jeopardy. Likewise, remaining in contact with your lender, as well as seeking advice from FHA counselors is important. With these three crucial elements in place, homeowners will have sufficient resources to make the best decision regarding how to stop foreclosure upon their home in New York.
