Judicial and nonjudicial states
Some states, including New York, generally require a lender to foreclose through a court case, while others allow a sale outside court under a power of sale in a deed of trust. That distinction affects how long the process takes and where a homeowner can raise defenses. In New York, residential foreclosures involve required pre-foreclosure notices, a mandatory settlement conference for many home loans, and a court-supervised sale if the case ends in a judgment. Lenders must also show they have the right to foreclose, which can be contested when loans have changed hands. New York changed its rules in 2022 to limit how lenders can reset the statute of limitations on older loans, and court rulings applying that law have continued to develop.
Federal servicing rules
Federal mortgage servicing rules require servicers to contact borrowers about loss mitigation, to evaluate a complete application under set procedures, and in many situations to hold off on starting or advancing a foreclosure while a timely application is under review. Loan modifications, repayment plans, forbearance, short sales, and deeds in lieu are the common alternatives. Loans backed by federal agencies or by Fannie Mae and Freddie Mac often come with their own loss mitigation programs, which change over time. Keep every letter from the servicer, records of payments, the dates you submitted documents, and the names of the people you spoke with. Servicer errors can be raised through a written notice of error or request for information, which obligates the servicer to respond.
Deciding on a path
Our first questions are where the matter stands, whether a foreclosure has been filed, and whether a sale date is set, since options narrow as a case advances. We review the loan documents, the notices you received, and your income and goals, whether you want to keep the home, sell it on your own terms, or leave with as little damage as possible. Defenses, loss mitigation, and bankruptcy each have a place in some cases, and the choice among them depends on the facts. Separately, HUD-approved housing counselors can help prepare modification applications at no cost. Tenants living in a home that is being foreclosed may have separate protections and should get advice before moving out.
