Behind on payments or facing foreclosure

First: you have more options than it feels like

If you've fallen behind on your mortgage, it's easy to feel like the house is already gone. It usually isn't. Foreclosure in New York is a court process, and it tends to move slowly. Between the first missed payment and an actual foreclosure sale, there are several points where you can work something out with your lender, bring the loan current, or sell the house on your own terms.

Selling to us is one of those options. It's not always the best one, and we'll tell you if we think you'd do better another way. This page explains how foreclosure generally works in New York, what your options are, what protections the law gives you when selling to an investor, and when a direct sale makes sense.

We're not attorneys, and nothing here is legal advice. If you're facing foreclosure, please talk to a foreclosure defense attorney or a HUD-approved housing counselor. Counseling is free.

How foreclosure generally works in New York

New York is a judicial foreclosure state, which means the lender has to go through the courts to foreclose. In broad strokes, the process usually looks like this:

• Missed payments. After you miss payments, the servicer will send late notices and eventually a notice that the loan is in default.
• Pre-foreclosure notice. Before filing a residential foreclosure case, lenders in New York are generally required to send a notice giving the homeowner time and information about housing counseling resources.
• The lawsuit. The lender files a foreclosure action in State Supreme Court. You'll be served with a summons and complaint.
• The settlement conference. For most owner-occupied residential foreclosures, New York requires mandatory settlement conferences, where you and the lender meet with a court referee to explore alternatives like a loan modification.
• Judgment. If the case isn't resolved, the lender may eventually get a judgment of foreclosure and sale.
• Foreclosure auction. The property is then sold at auction by a court-appointed referee.

Every case is different, and timelines vary a lot. Some cases take a year or more. The important point is that there's usually time, and every stage is a chance to act.

Options other than selling

Before deciding to sell, make sure you understand the other paths:

• Reinstatement. Paying the past-due amount, plus fees, to bring the loan current.
• Repayment plan. Spreading the past-due amount over several months on top of your regular payment.
• Forbearance. A temporary pause or reduction in payments, often used for short-term hardships like a job loss or medical issue.
• Loan modification. A permanent change to the loan terms, such as a lower rate, a longer term, or adding missed payments to the back of the loan.
• Refinancing. Replacing the loan with a new one, if your credit and equity allow it.
• Bankruptcy. Filing can pause a foreclosure through what's called the automatic stay. It has serious consequences and requires an attorney.

A housing counselor or attorney can help you figure out which of these fits your situation. If one of them works and you want to keep the house, that's a great outcome, and we'd rather you keep it.

When selling makes sense

Selling is often the right choice when:

• You have equity in the house, meaning it's worth more than you owe
• Keeping the house isn't realistic even with a modification
• The house needs repairs you can't afford
• You'd rather leave with money in your pocket than lose the house at auction
• You want to protect your credit as much as possible

If the house is sold before the foreclosure auction, the mortgage is paid off from the sale and you keep the remaining equity. If it goes to auction, you lose control of the price and the timing, and in many cases the homeowner walks away with far less, or nothing.

Your rights when selling to an investor in New York

New York has a law called the Home Equity Theft Prevention Act. It was written to protect homeowners in foreclosure or default from people who take advantage of them, for example by convincing them to sign over a deed for much less than the house is worth.

When the law applies, it generally requires the contract with the buyer to be in writing, in plain language, with specific notices, and it gives the homeowner a right to cancel the contract within a set period after signing. It also restricts certain kinds of arrangements, like deals where the homeowner sells the house and then rents it back with a promise to buy it back later.

We follow this law. Before you sign anything with us, we'll walk you through the required notices and your cancellation right. And we'll encourage you, every time, to have your own attorney review the contract.

If anyone ever pressures you to sign over your deed quickly, promises to "save" your house for an upfront fee, or asks you to make mortgage payments to them instead of your lender, stop and talk to an attorney. Those are classic foreclosure rescue scams.

What we need to know to make an offer

To give you a useful number quickly, it helps to know:

• The address and general condition of the house
• About how much you owe on the mortgage and any second mortgage or home equity line
• How far behind you are
• Whether a foreclosure case has been filed, and if so, whether a sale date has been set
• Whether there are other liens, like unpaid property taxes or judgments

You don't need exact numbers to get started. We'll get the official payoff figures from your lender before closing.

If you already have a sale date

If there's already an auction date on the calendar, time matters. Call your attorney right away, and call us. A sale before the auction may still be possible, but closing requires title work and payoff figures, and the lender and court process has its own deadlines. Your attorney can tell you what options exist to buy time, if any.

If you owe more than the house is worth

If the mortgage balance is higher than the house's value, a regular sale may not cover the payoff. In that case, a short sale, where the lender agrees to accept less than what's owed, might be an option. Short sales take longer and require the lender's approval. We have a separate page explaining how they work.

What happens to your credit

Missed payments are reported to the credit bureaus regardless of what happens next. But a completed foreclosure is generally one of the most damaging events on a credit report. Selling before foreclosure, bringing the loan current, or completing a modification typically does less long-term harm. A housing counselor can give you a clearer picture based on your specific situation.

How the sale works when you're behind

1. Call us or fill out the form. Tell us about the house and where things stand with your lender.
2. We walk through the house once.
3. We send a written offer, showing the estimated payoff and what you'd walk away with.
4. Your attorney reviews the contract, including the required notices.
5. We order title and get payoff letters from your lender.
6. We close, the lender is paid in full from the sale, and you receive the remaining equity.

Getting help now

You don't have to figure this out alone. Free foreclosure prevention counseling is available through HUD-approved housing counseling agencies, and New York has programs that connect homeowners with free legal help. Use them. Then, if selling turns out to be the best option, we're here.

Don't ignore the mail

One of the biggest mistakes homeowners make is not opening letters from their lender or the court. It's understandable. The envelopes are stressful. But those letters contain deadlines, conference dates, and options that can disappear if you miss them. If you've got a pile of unopened mail, open it today, or bring it to a housing counselor or attorney and let them go through it with you. Missing a settlement conference or a court deadline can make an already hard situation much harder.

Staying in the house until closing

If you sell to us, you can stay in the house until closing, and we can often build a little extra time after closing into the contract so you can move without rushing. You'll know your exact move-out date before you sign anything.

Foreclosure and other liens

If you're behind on your mortgage, you may also be behind on property taxes, water bills, or other obligations. Those can create additional liens on the house. In a sale, all liens are generally paid from the proceeds at closing. If the total is more than the house's value, a short sale or other negotiated solution may be needed. Bring every bill and notice to your attorney or housing counselor so they can see the full picture.

What to bring to a housing counselor or attorney

• Your most recent mortgage statements
• Any letters from your servicer, including default and pre-foreclosure notices
• Court papers, if a case has been filed
• Proof of income and a list of monthly expenses
• Information about your hardship, such as job loss or medical bills
• Property tax bills and homeowner's insurance information

Having these ready makes your first meeting far more productive.

Keep living your life

Falling behind on a mortgage is stressful, and it can feel isolating. It happens to many people because of job loss, illness, divorce, or rising costs, and it says nothing about your worth. Take it one step at a time: open the mail, get free counseling, learn your options, and make a decision that fits your family. If that decision is to sell, we'll make the process as calm and clear as we can.

How the sale works

Questions