Legal Question in Real Estate Law in New York

If the first mortgagee did not seek a deficiency judgment within 90 days after the sale, then the amount received at the sale (usually the property itself) is deemed full satisfaction of the indebtedness. They should have 1099'd you because now you might have income from discharge of indebtedness, unless you can show that the Fair Market Value of the house was greater than the debt. But if the bank doesn't report the transaction, you may be able to deal with the IRS by taking the position that the bank was fully satisfied and you have no such income.

This does not dispose of the second mortgage. There is a six-year statute of limitations for debt collection. It runs from the last payment you made on the second mortgage. Assuming that you were not makinig payments after October 2007, you're more than halfway home. Do not make any payments. Even if they ask for a "good faith" $1.00 to close the account, because by paying the $1.00 you would give them another 6 years to sue on the note.

They cannot sue you if they cannot find the note. (Well, they can sue but they will not win.) Do make sure if you are sued to demand that they let you come to them and see the original note. Copies don't count!