When you obtain a loan to purchase a home, the lender assumes the right to repossess the property should you fail to keep up with your mortgage payments. This process is known as foreclosure. New York is a judicial foreclosure state, meaning that the foreclosure must go through the court.
However, even after the foreclosure, a lender may still be left with a balance on the loan. This happens when the loan debt exceeds the value of the foreclosed property. In this case, your lender can pursue you as well as other loan obligators for the deficiency due on the loan after the foreclosure through a process known as a deficiency judgment.
So what is New York’s deficiency judgment and how do you obtain it?
Basically, a deficiency judgment is a form of judgment that a lender obtains against the homeowner (borrower) when the mortgage foreclosure sale amount is not sufficient to offset the underlying credit. Once obtained, the borrower must pay the lender the owed amount.
New York’s Real Property Actions and Proceedings Law (RPAPL) outlines the procedure for obtaining a deficiency judgment.
Once the home has been foreclosed, the lender must file a motion for a deficiency judgment within 90 days from the date the buyer received the deed. If this timeframe expires, the lender may lose the right to pursue you for the loan deficit.
While filing the motion for a deficiency judgment, the lender will be required to provide the following:
- The amount owed after deducting the foreclosure cost from the loan balance
- The nature of the foreclosure (judicial foreclosure in the case of New York)
- A certified copy of the property value at the time of the foreclosure
A deficiency judgment allows the lender to pursue the borrower for any loan balance following a foreclosure. Knowing your legal options can help you protect your rights when there is a deficiency judgment against you.