• Upon default, a ninety (90) day notice is sent to the homeowner as required by NY RPAPL 1304.
  • File sent to foreclosure counsel.
  • Foreclosure counsel requests scheduling of a mandatory settlement conference required by CPLR 3408.
  • Foreclosure counsel requires the homeowner to complete financial forms to determine their “eligibility” for a deed in lieu of foreclosure.
  • Title search obtained to ensure there are no subordinate liens encumbering the mortgaged premises.


Even if a deed in lieu is accepted, there will be a substantial delay before the deed is obtained.

Ninety Day Notice

3 Months

Filing Summons and Complaint

1 Month

Serving Summons and Complaint

1-2 Months

Time to Answer

1 Month

Mandatory Settlement Conference(s)

3-12 Months

Completion of Financial Forms

1-2 Months

Total Delay

10-21 Months


  • HOMEOWNER FEAR: Failure to disclose assets for fear lender  will pursue  a deficiency judgment.
  • HOMEOWNER INTIMIDATION:  Failure or procrastination in completing financial forms resulting in numerous requests for adjournments of mandatory settlement conferences.
  • OUTDATED DOCUMENTS: By the time lender obtains all financial documentation, the initial documentation has expired and/or become outdated, creating frustration for all parties.
  • SUBORDINATE LIENS: Homeowner ineligibility when subordinate liens encumber the property.


  • Deed in Lieu not obtained.
  • Delayed foreclosure action (1 year or more) and ultimately requiring an eviction proceeding.
  • Court frustration at lender’s refusal to resolve the foreclosure, resulting in sanctions for “failure to negotiate in good faith”


  • LENDER REFUSAL: Some lenders refuse to release the homeowner from personal liability in exchange for a deed in lieu, but still fail to pursue a deficiency judgment upon completion of the foreclosure action.
  • COST EFFECTIVENESS: Most lenders do not pursue deficiency judgments because they are not cost effective.
  • ADDITIONAL COSTS: Typically foreclosure attorneys do not accept contingency fees to obtain and collect deficiency judgments, resulting in additional costs to the lender.
  • TIME CONSTRAINTS: Since deficiency judgments must be made within ninety (90) days of the foreclosure sale, there is not  enough time to transfer the file to a collection attorney working on a contingency basis.


  • Immediately upon a homeowner’s default, a lender can offer a release of liability if it can determine from the outset, that a deficiency judgment will not be pursued.
  • Lender, or its foreclosure attorney, can send a letter offering to release the homeowner from personal liability in exchange for a deed in lieu, emphasizing, “NO QUESTIONS ASKED” and “NO FINANCIAL STATEMENTS REQUIRED.”


  • SAVE COSTS: Obtaining a deed at the start of the foreclosure action will save years of real estate taxes, insurance, interest, legal fees and costs.
  • COURT APPROVAL:  Courts will perceive the lender as having negotiated in good faith by offering the release of personal liability in exchange for a deed in lieu.

Even when the foreclosure process must be completed, in order to extinguish subordinate liens, there are still substantial benefits to obtaining a deed:

  1. No mandatory settlement conference requirement.
  2. No delays caused by homeowner litigation.
  3. No delays caused by homeowner bankruptcy filing.
  4. REO Marketing can begin while the foreclosure is in process.


  • Non-merger language should always be included in the deed in lieu.
    •  In order to preserve the mortgage lien.
    • To enable the Lender to complete the foreclosure should any intervening liens need to extinguished.
  • Alternatively, the deed may be conveyed to a third party entity, which may be lender’s subsidiary or affiliated entity.


  • Lender should confirm at the outset that a deficiency judgment will not be pursued.
  • Lender should offer a release of personal liability to the homeowners in exchange for a deed in lieu.
  • A letter emphasizing that no financial forms or other requirements are needed should be sent by the lender or its counsel at the beginning of the foreclosure process.