Being mainly a lien theory state New York legislature allows for judicial foreclosures, however the non-judicial process is allowed, but rarely used. In this instance, both the mortgage and the trust deed are used as primary instruments of security for the underlying loan. The non-judicial process is used when a “power of sale” clause is found in the trust deed and the judicial process is used when a Mortgage Lien is issued as the instrument of security.
Because judicial foreclosures take place in the most part, the lender has to take the matter to court when a borrower defaults on their mortgage repayments. This process can take anything from 120 to 180 days if the matter is not contested and the borrower does not file for bankruptcy.
The lender must file a complaint against the borrower in the courts and they in turn must issue a decree of sale. The initial court order will allow a certain period of time for the defaulter to pay the required amount of money to the lender. If this does not happen within the stipulated time frame, the property is ordered sold at a public auction where anyone is allowed to place a bid, including the lender. The Auction sale is generally conducted by the Sheriff of the county where the property is situated.
New York laws do not allow any rights of redemption, this would allow the borrower to make good on the amount owed by them plus costs and reclaim the property. Deficiency judgments are allowed for the lender if the sale of the property does not meet the amount required to cover the loan debt. The lender is however required to file a deficiency complaint within ninety days of the property being sold on auction.