Asked and AnsweredI have not been able to make my co-op mortgage payment for the past three months. If the bank declares my loan in default, how long will it take before the bank forecloses on my apartment?
In theory, not very long. When a bank is holding shares allocated to a cooperative apartment as collateral for a loan, the nature of the collateral is personal property and not actually a lien against real estate (as it would be with a condominium apartment). At the closing when you purchased your apartment, you signed various assignment documents, transferring the shares and your interest in the proprietary lease to the bank, as collateral to be held in the event of a default. Those assignment documents are held in escrow by the bank and can be activated if and when the bank declares your loan in default. If a bank does seek to “take the shares” when a loan goes bad, unlike a foreclosure proceeding with a condo unit, the process by which a bank acquires the shares can occur in a short period of time. Banks don’t want to be in the real estate business, particularly in the economic times we are living through. Nevertheless, when financial problems occur, make sure you put your co-op loan payment ahead of your other obligations, or you will find yourself without an apartment. For more on this subject see "What Happens When a Party Defaults?"