Deficiency judgements under New York Law

by richard on September 25th, 2010

Different States have different laws regarding deficiency judgements which is based on whether or not the State is a recourse state or a non-recourse State.

New York State is a recourse State which means that whoever lends you money, (usually a bank) can come after you (has recourse against you) and can seek a deficiency judgement against you if they did not recieve all of the money owed to them at the auction or short sale closing.

Section 1361 of the Real Property Actions and Proceedings Law governs deficiency judgements in New York State. It  states that if after a auction or short sale closing, there is money owed to a lender, the lender can make a motion for a deficiency judgement within the 90 days after the auction or short sale closing. If they do not make the motion within 90 days, they would lose their right to sue for the money that is owed to them.

Many homeowners  erroneously believe that their monetary obligations end after the auction or closing. This is not necessarily the truth. However the reality is that in New York State lenders rarely seek deficiency judgements. The reason for this is probably because the expense and effort of obtaining a deficiency judgement and enforcing it against a debtor with questionable assets is just not worth it. They figure if the debtor could not afford their monthly mortgage payments, then they probably do not have the funds to payoff the lender

Just to let you know  our negotiators at are able to get a full release also known as a  ”satisfaction of lien” in over 90% of the short sales that we work on. This means that the lender has forfeited their right to seek a deficiency judgement.

While deficiency judgements are rarely sought after in New York State, if you have any worries about potentially recieving a deficiency judgement then you should consult a attorney.

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