In New York state, a bank can use either judicial or non-judicial foreclosures. If a power of sale clause is written into the mortgage or deed of trust, this enables the bank to save the time and expense of filing a lawsuit with the court in order to proceed. A power of sale clause is wording that preauthorizes the bank with the option of selling the home without court approval. Most deeds of trust or mortgages do contain a power of sale clause. Even though time and money can be saved by using a non judicial process, most banks in the state of New York use judicial foreclosure.
In the absence of a power of sale clause, judicial or in court foreclosure begins in this state when the bank files a complaint against the home owner. The purpose of this action is to obtain a decree of sale from the court. When the court finds the home owner in default, the homeowner will then be given a period of time in which they are allowed to pay the amount that is past due, plus costs. If they can accomplish this, then the sale of the house will be stopped, and the foreclosure on the credit history is avoided. If, during this time, the home owner cannot come up with this money, then the house will be sold to the highest bidder by the county sheriff or a referee.
The sale date, time, and terms must be advertised in a newspaper with circulation in the county where the home is located for four to six weeks prior to the sale. Anyone may bid at this sale. After the winning bid has been accepted by the sheriff or referee, this officer is required to execute a deed to the person making the highest bid at the sale. The sheriff or referee is further required to pay the bank and receive a receipt of that payment from the bank.
Sometime in the thirty days following the executing of the deed to the purchaser, the officer must file a report of the sale. This report needs to include the receipt of the payment to the bank. This report must be filed with the clerk of the court. Generally, the sale cannot be confirmed for three months following the filing of this report.
Foreclosure in this state usually runs its full course, in 120 days. The state of New York does not allow any rights of redemption to the borrower who loses their home to foreclosure. That means the state does not give the former home owner anytime frame in which to regain ownership to the home by matching the winning bid plus costs and or interest. Deficiency judgments are allowed. This enables the bank to seek more money than was generated by the sale from the former home owner. If the bank feels that the funds from the sale are not large enough to satisfy the loan they can seek more money from the homeowner. Deficiency judgments only allow for the difference between what the house sold for and what was owed on the loan.
Most people who lose their home at foreclosure, do not have any other resources from which to pay the bank any additional money. Banks understand this. So, unless they have reason to believe that the former home owner does have other properties or other resources to pursue, they will most likely not attempt a deficiency judgment. It would be a waste of time, money, and energy.
