Got a Notice of Default in New York? What It Means and What Happens Next
A letter saying your mortgage is “in default” can be frightening. But in New York, a notice of default is the start of a long process, not the end. It is also the point where you have the most options to save your home or leave on your own terms.
Here is what the notice means, what usually happens next, and what to do now.
What is a notice of default?
A notice of default is a letter from your mortgage servicer saying you have fallen behind on your payments and broken the terms of your loan. It usually tells you:
- How much you owe to catch up, including missed payments and late fees
- The deadline to pay it, often at least 30 days from the date of the letter
- That the lender may demand the full loan balance and begin foreclosure if you do not catch up
This letter is sometimes called a breach letter or demand letter. Unlike in some states, New York does not record a public “notice of default” to start foreclosure. Instead, a New York lender must go to court, and it must send you another important notice first.
What happens next in New York
1. Contact from your servicer
Federal rules require your servicer to try to reach you early, usually by phone within about 36 days of a missed payment and in writing by about 45 days, to explain options for help. Answer these calls and letters.
2. The 90-day pre-foreclosure notice
Before filing a foreclosure lawsuit on your home, the lender must send you a special notice at least 90 days before it files. This notice must list at least five housing counseling agencies near you. If you get it, the clock is running, but you still have time.
3. No lawsuit before 120 days
In most cases, federal rules do not allow a servicer to start a foreclosure until you are more than 120 days behind. And if you send in a complete application for help, such as a loan modification, the servicer generally has to review it before moving forward with the lawsuit.
4. The foreclosure lawsuit
If nothing is resolved, the lender files a lawsuit and has you served with a summons and complaint. You then have 20 or 30 days to answer, depending on how you were served. Our step-by-step guide to the New York foreclosure process explains each stage.
What to do right now
- Do not ignore the letter. Every month you wait adds fees and interest and narrows your options.
- Check the numbers. Compare the amount in the letter to your own records. Ask your servicer in writing if anything looks wrong.
- Call your servicer and ask about loss mitigation. This includes a loan modification, a repayment plan, forbearance, a short sale or a deed in lieu of foreclosure. Ask them to send you a complete application.
- Get free help. A HUD-approved housing counselor can review your situation and help you apply. New York’s Homeowner Protection Program offers free counseling and legal services at (855) 466-3456.
- Keep copies of everything. Save every letter, and write down the date, time and name of everyone you speak with.
Watch out for foreclosure scams
Once you are in default, you may start getting calls and mail from people offering to “save your home” for a fee. Be very careful. Never pay upfront fees for mortgage help, never sign over your deed, and never sign papers you do not understand. Read our guide to foreclosure rescue scams and deed theft in New York.
If keeping the home is not realistic
Sometimes the payments are simply out of reach. If that is your situation, a short sale may be better than foreclosure for your credit and your future. Homeowners who complete a short sale may also qualify for our relocation grant to help with the cost of moving.
Received a notice of default? Get free help today
Abraxas Foundation is a New York nonprofit that helps homeowners understand their options and avoid foreclosure. We meet you at your home, our help is completely free, and we can refer you to free legal assistance and HUD-approved housing counselors.
Call (929) 346-5734 or tap the button below for a free, confidential review.
Helpful official resources: NY Courts CourtHelp: Foreclosure and NY DFS Foreclosure Consumer Bill of Rights.
This article is general information, not legal or financial advice. Speak with a housing counselor or attorney about your situation.
