This page covers New York law and the federal mortgage servicing rule (Regulation X). Both are aimed at homes: the settlement conference applies to a home loan where the defendant lives in the property (CPLR 3408(a)), and the federal loss mitigation procedures apply to a mortgage loan on the borrower's principal residence, with some exemptions, including small servicers and reverse mortgages (12 CFR 1024.30). Owners of investment or entity-held property should first check which protections apply in a commercial or residential foreclosure. KOR Law LLP's foreclosure defense practice handles mandatory settlement conference compliance as part of its residential work.
What options are on the table?
The court system's CourtHelp guide groups the options in two sets. To keep the home: reinstatement (paying the full past-due amount by a set date), forbearance (a temporary reduction or pause, with the missed payments added back later), a loan modification (for example a longer term or a lower rate), or a refinance with another lender. To leave the home without more debt: a deed in lieu of foreclosure, where the agreement should say the deed fully satisfies the debt, or a short sale, where the agreement should say the lender waives a deficiency judgment. CourtHelp also notes that earlier is better, since a workable deal gets harder as arrears grow. "Loss mitigation" is the umbrella term for all of these alternatives to foreclosure.
What counts as a complete application?
Almost every federal protection turns on one date: when the servicer received a complete loss mitigation application. An application is complete when the servicer has all the information it requires from the borrower to evaluate the options available, and the servicer must use reasonable diligence to collect what is missing (12 CFR 1024.41(b)(1)). Whether a protection applies is decided as of the date the complete application was received (1024.41(b)(3)).
If an application arrives 45 days or more before a sale, the servicer must tell you within 5 business days whether it is complete and, if not, list the missing documents and give a reasonable date to send them (1024.41(b)(2)). Once the file is complete, a separate notice within 5 business days must state the date it was received and that the servicer expects to finish within 30 days (1024.41(c)(3)). If you send everything the incomplete notice asked for, the application is "facially complete," and if the servicer later needs corrections, it must keep treating the file as complete for the foreclosure protections until you have had a reasonable chance to supply them (1024.41(c)(2)(iv)). As a rule, a servicer may not deny a complete application only because it is waiting on documents from someone other than you (1024.41(c)(4)(ii)).
What does the federal rule require of the servicer, and when?
The protections depend on when the servicer receives a complete application, measured against the scheduled sale:
| When the application arrives | What the servicer must do |
|---|---|
| Any application 45 days or more before a sale | Review it promptly and tell you in writing within 5 business days whether it is complete, listing anything missing (1024.41(b)(2)) |
| Complete application more than 37 days before a sale | Evaluate you for all available options and send a written decision within 30 days (1024.41(c)(1)); a denied modification must state the specific reasons (1024.41(d)) |
| Complete application after the foreclosure was filed but more than 37 days before a sale | No motion for judgment or order of sale, and no sale, until you are found ineligible and any appeal is over, you reject every offer, or you fail to perform an agreement (1024.41(g)) |
| Complete application 90 days or more before a sale | At least 14 days to accept or reject an offer, and a right to appeal a modification denial within 14 days, decided within 30 days by different staff (1024.41(e), (h)) |
| Complete application between 90 and 37 days before a sale | At least 7 days to accept or reject an offer (1024.41(e)) |
Two limits matter. The evaluation deadline and the sale protection apply only to an application that is complete more than 37 days before the sale. And a servicer does not have to repeat the process if it already handled a complete application from you and you have been delinquent at all times since (1024.41(i)). The rule does not require the servicer to offer any particular option (1024.41(a)). The court stages that come before any sale are laid out in what happens after you are served with a foreclosure summons in New York.
What happens after the servicer decides?
If you are denied a trial or permanent modification, the decision notice must give the specific reason for each option denied (1024.41(d)), and, where an appeal is available, how long you have and what it requires (1024.41(c)(1)(ii)). An appeal is reviewed by different staff, who must decide within 30 days, and your deadline to accept any offer is pushed to 14 days after that appeal decision (1024.41(e)(2)(iii), (h)(3), (h)(4)). If you do not accept an offer by the deadline, the servicer may treat it as rejected (1024.41(e)(2)(i)).
Trial plans have their own safety valve. A borrower who misses a paperwork step for accepting a trial modification but makes the trial payments on time must get a reasonable period to finish the remaining steps (1024.41(e)(2)(ii)). A servicer may also offer a short-term forbearance or repayment plan on an incomplete application, but while you perform under it, the servicer may not move for a foreclosure judgment or order of sale, or conduct a sale (1024.41(c)(2)(iii)).
How does the New York settlement conference fit in?
The conference is where the court keeps watch over the application. In a home loan case where you live in the property, the court must hold it within 60 days after proof of service is filed, and its stated purpose includes evaluating a loan modification, short sale, deed in lieu or other loss mitigation (CPLR 3408(a)). If the lender has evaluated or is evaluating you, it must bring a summary of where the review stands, the outstanding items, the expected completion date and, after a denial, the denial letter with the data fields and values used in its net present value evaluation (CPLR 3408(e)). In Brooklyn, the steps at 360 Adams Street are in what to expect at Kings County Supreme Court in a foreclosure case.
Good faith includes "avoiding prosecution of foreclosure proceedings while loss mitigation applications are pending" (CPLR 3408(f)). If the court finds the plaintiff did not negotiate in good faith, it must at least toll interest, costs and fees during the delay it caused (CPLR 3408(j)). Once a modification is signed, the plaintiff must discontinue the case within 90 days (CPLR 3408(g)). The conference itself, from what to bring to the county rules, is covered in what happens at a New York foreclosure settlement conference.
Does applying for a modification pause the deadline to answer?
No. The conference rules do not change the time to answer under CPLR 320(a). Instead, at the first conference the court must tell a defendant who has not answered about the requirement to answer and the risk of losing defenses (CPLR 3408(l)), and a defendant who appears at the conference without having answered on time may serve an answer within 30 days of that first appearance, with no substantive defenses waived (CPLR 3408(m)). The answer itself is explained in how long you have to answer a foreclosure complaint in New York. If the deadline has already passed, see what happens if you missed the deadline to answer a foreclosure in New York.
What if the servicer mishandles the application?
Send a written notice of error with your name, your loan account information and the error you believe occurred, to the address the servicer designates for that purpose (12 CFR 1024.35(a), (c)). The servicer must acknowledge it in writing within five business days (1024.35(d)). For an error about filing a foreclosure, moving for judgment or holding a sale in violation of the loss mitigation rules, it must respond before the sale or within 30 business days, whichever is earlier, with no extension allowed; most other errors get 30 business days, extendable once by 15 (1024.35(e)(3)). The servicer may not charge a fee or demand a payment as a condition of responding (1024.35(h)). Borrowers can enforce the loss mitigation rule under section 6(f) of RESPA (1024.41(a)); the broader error process is explained in how to make a mortgage servicer fix an error. Keep a copy of every page you send, with proof of the date it went out; the list in what to bring to a foreclosure defense consultation shows what else to keep together.
What changes the answer for your application?
- Whether the home is your principal residence. The federal loss mitigation procedures apply only to a loan secured by the borrower's principal residence (12 CFR 1024.30(c)(2)), and the New York conference only where the defendant lives in the property (CPLR 3408(a)).
- A small servicer. Small servicers are exempt from most of 1024.41, but in most cases may not start a foreclosure before the loan is more than 120 days delinquent, and may not move for judgment or sale while you are performing under a loss mitigation agreement (1024.30(b)(1); 1024.41(j)).
- A reverse mortgage. Servicers of reverse mortgages are exempt from the federal procedures (1024.30(b)(2)). The New York conference still covers a reverse mortgage home loan, except that after a default triggered by the last surviving borrower's death it applies only if that borrower's spouse lives there, or a successor who owns or claims the home by will or inheritance lived there at the time of death (CPLR 3408(a)(2)).
- An entity borrower. A New York home loan requires a borrower who is a natural person (RPAPL 1304(6)(a)), so a loan to an LLC does not get the mandatory conference even if the owner lives in the house. The firm's article on LLC-owned homes and commercial mortgages explains that trap.
- An earlier complete application. If the servicer already processed a complete application and you have been delinquent ever since, it need not run the process again (1024.41(i)).
- A servicing transfer. A new servicer must handle a pending application within the old servicer's deadlines, your protections carry over, and a complete application pending at transfer must be decided within 30 days of the transfer date (1024.41(k)(1), (k)(3)).
For example: an application that arrives after the case is filed
For example, imagine a homeowner in Queens who falls behind after a job loss and is served with a foreclosure summons. (This is a made-up illustration, not a real client or result.) She answers on time and mails a modification application on May 1, keeping the receipt. On May 6 the servicer writes that the file is incomplete, lists a missing bank statement and gives a date to send it. She sends it on May 12, and on May 16 the servicer confirms the application is complete as of May 12 and expects to decide within 30 days.
Because the complete application arrived after the case was filed and no sale has been scheduled, the servicer may not move for a judgment of foreclosure and sale while the review and any appeal run (1024.41(g)). On June 10 it denies a permanent modification, giving the reason and a 14-day appeal window. She appeals on June 18, and different staff must decide within 30 days. At the next conference, plaintiff's counsel must bring the denial letter and the net present value inputs (CPLR 3408(e)), which lets her test the reason the court is being given.
Common mistakes when applying during a foreclosure
- Sending documents piecemeal with no record. The protections run from the date the application became complete. Keep proof of what you sent and when.
- Ignoring the date in an incomplete notice. Send every missing item the notice lists by the date it gives.
- Letting the answer deadline pass. An application does not extend the time to answer under CPLR 320.
- Missing the 14-day appeal window. Where an appeal is available, it must be made within 14 days after the decision (1024.41(h)(2)).
- Waiting until a sale is near. An application completed 37 or fewer days before a sale does not get the 30-day evaluation or the bar on a sale.
- Mailing a notice of error to the wrong place. If the servicer has designated an address for notices of error, use it (1024.35(c)).
What to do this week
- Ask the servicer for its full list of required documents, and note the date and who you spoke to.
- Send the full package at once, by a method that proves the date of delivery, and keep a copy of every page.
- Calendar the dates in the servicer's notices next to your court answer deadline.
- If you have a conference date, bring the servicer's letters so the court can see where the review stands.
- Find the servicer's designated address for notices of error.
- Gather the papers on our consultation checklist and talk with a lawyer before the next court date.
Frequently asked questions
Does the servicer have to give me a modification?
No. The federal rule requires a fair process, not a particular result: nothing in it obliges a servicer to offer any specific option (1024.41(a)). New York likewise says that failing to make an offer, or rejecting one, does not by itself show bad faith (CPLR 3408(f)).
Can I apply more than once?
You can, but the servicer must repeat the full federal process only if it has not already handled a complete application from you, or if you brought the loan current at some point after that earlier application (1024.41(i)).
Will a notice of error stop the foreclosure?
Not by itself. Apart from what the error rule provides for errors about foreclosure filings and sales under the loss mitigation rules, nothing in it stops a servicer from pursuing its remedies, including a foreclosure sale (1024.35(i)(2)). If such a notice arrives seven or fewer days before a sale, the servicer need only make a good faith attempt to respond (1024.35(f)(2)).
What if my loan was transferred to a new servicer mid-review?
Your protections continue. The new servicer must meet the old servicer's deadlines for a pending application and must let you accept or reject an offer during whatever time was left (1024.41(k)(1), (k)(5)).
What if a modification is not possible?
The conference also covers a short sale or a deed in lieu (CPLR 3408(a)). If the case goes to judgment and sale, read where and when foreclosure auctions are held in New York City.