This is a concept servicers need to know – and likely do – but there has been peripheral confusion about it in New York so looking at a new case which firms up the idea (part of it) is helpful. [See, Bank of New York v. Ortiz, 30 A.D.3d 551, 817 N.Y.S.2d 154 (2d Dept. 2006).]
The first question to be answered in this realm is when does a borrowers right to redeem (payoff the mortgage) end, when the property is struck down at the foreclosure auction sale or when the referee=s deed is delivered to the bidder? Citing this writer=s treatise, the court confirmed that the owner-borrower=s right to title in the mortgaged property ends with the auction sale and need not await delivery of the deed.
This then leads to the question asked and firmly answered by the new case. If a borrower files a petition in bankruptcy after the auction sale but before the deed is conveyed, does the automatic stay halt delivery of the deed? Answer: ANo@.
At the moment the bankruptcy petition was filed, the borrower no longer had any legal or equitable interest in the property. Therefore, the property could not be included in the bankruptcy estate and the stay could not have any application. The deed could go ahead.
Mr. Bergman, author of the four-volume treatise, Bergman on New York Mortgage Foreclosures, LexisNexis Matthew Bender (rev. 2017), is a partner with Berkman, Henoch, Peterson, Peddy & Fenchel, P.C. in Garden City, New York. He is also a member of the USFN, The American College of Real Estate Lawyers, The American College of Mortgage Attorneys, an adviser to the New York Times on foreclosure issues and writes a regular servicing column for the New York Law Journal. He is AV rated by Martindale-Hubbell, his biography appears in Who’s Who In American Law and he has been for years listed in Best Lawyers In America and New York Super Lawyers.