If you are in foreclosure in New York, you may feel like the outcome is already decided. It is not. New York's judicial foreclosure process is long, and the state has built in numerous protections that give homeowners real opportunities to stop or redirect the process. Here are seven options that could save your home — or at least protect your financial future.
1. Loan Modification
A loan modification permanently restructures your mortgage to make it affordable. Your lender may agree to lower the interest rate, extend the loan term, reduce the principal balance, or capitalize the arrears into the new loan amount.
In New York, the mandatory settlement conference process (CPLR §3408) is specifically designed to facilitate loan modification discussions. The court requires both you and the lender to negotiate in good faith. Many homeowners who actively participate in these conferences are able to secure modifications that allow them to keep their homes.
Best for: Homeowners with stable or improving income who want to stay in their home.
2. Forbearance Agreement
A forbearance agreement temporarily pauses or reduces your mortgage payments while you get back on your feet. This is typically used for short-term hardships such as a job loss, medical emergency, or temporary reduction in income.
The critical point with forbearance: you will eventually need to repay the missed amounts. Make sure you have a realistic plan for how to handle the repayment (lump sum, repayment plan added to monthly payments, or a follow-up loan modification).
Best for: Homeowners facing a temporary setback who expect to resume payments.
3. Short Sale
If you owe more than your home is worth (or close to it) and cannot afford the payments, a short sale lets you sell the property for less than the mortgage balance with the lender's approval. The lender agrees to accept the proceeds as full or partial satisfaction of the debt.
Short sales take time — lender approval can take 60 to 120 days or more. But the credit impact is typically less severe than a completed foreclosure, and you avoid the stigma of having a foreclosure on your record.
Best for: Homeowners who are underwater on their mortgage and cannot afford to stay.
4. Deed in Lieu of Foreclosure
With a deed in lieu, you voluntarily hand over your property to the lender in exchange for being released from the mortgage. This avoids the foreclosure lawsuit entirely. Lenders sometimes prefer this option because it is faster and less expensive than a court proceeding.
You may be required to attempt a sale first. There can also be tax consequences (the forgiven debt may be treated as income), so consult a tax professional before proceeding.
Best for: Homeowners who want to exit the property quickly and minimize credit damage.
5. Chapter 13 Bankruptcy
Filing a Chapter 13 bankruptcy petition triggers an automatic stay that immediately stops the foreclosure process. Under Chapter 13, you propose a repayment plan (three to five years) to catch up on missed mortgage payments while continuing to make current payments.
If you successfully complete the plan, you keep your home. Chapter 13 is a powerful tool, but it has significant long-term credit implications and should only be pursued with the guidance of a qualified bankruptcy attorney.
Best for: Homeowners with regular income who have fallen behind but can afford their ongoing payments.
6. Selling Your Home on the Open Market
If you have equity in your home, selling it before the foreclosure is completed may be the smartest financial move. A traditional sale allows you to pay off the mortgage in full, cover any arrears and legal fees, and keep whatever equity remains.
You can sell at any point before the auction. The earlier you start, the more time you have to get the best price. Working with an agent who understands foreclosure timelines and can move quickly is essential — and that is exactly the kind of specialist the Hudson River Realtors network can connect you with.
Best for: Homeowners with equity who do not want to keep the property.
7. Mandatory Settlement Conference (Using It Strategically)
The mandatory settlement conference is not just a formality — it is a genuine opportunity. Under CPLR §3408, the court brings you and the lender together to explore alternatives to foreclosure. The court referee or attorney who presides has real influence over the process.
Best for: Every homeowner in foreclosure — this is your court-mandated opportunity to fight for a solution.
- Attend every conference — missing one can result in your case being moved forward
- Bring all requested financial documents (pay stubs, tax returns, bank statements, hardship letter)
- Be prepared to present a realistic proposal (modification terms, repayment plan, etc.)
- If the lender is not negotiating in good faith, bring it to the court's attention — there are consequences for bad-faith behavior
The Bottom Line: You Have More Options Than You Think
Foreclosure in New York is a long process by design. The state wants to give homeowners every opportunity to resolve the situation. But those opportunities only help if you take action.
The single biggest mistake homeowners make is waiting too long. Every week that passes reduces your options. If you are behind on your mortgage or have received a foreclosure notice, reach out today. The Hudson River Realtors referral network connects you with experienced professionals who can help you evaluate your best path forward.