People moving in empty homeUnderstanding what a foreclosure litigation is and what it entails is an important step in determining what course of action YOU want to take.  Unfortunately, there is a common misunderstanding about what a foreclosure action is which has resulted in many homeowners making the wrong decisions, including reliance on the wrong person or taking the wrong advice. These decisions can result in consequences which deprive you of your rights and choices.  This Article is intended to give a brief overview of exactly what a foreclosure litigation is and how to protect your rights and choices.

My experience has revealed a common misunderstanding among clients facing foreclosure. It is believed that once a foreclosure action is filed, the house automatically transfers to the Bank. In reality, loss of ownership is the last part of a foreclosure litigation.  To better understand let’s look at the event that led to you and the bank coming together, the Closing of your house.

When buying your house, you entered into a contract agreement with the seller which said that you would give the seller money in exchange for the deed to the house. That agreement was completed when the deed was signed over to you and the money was transferred to the seller.  But, where did you get the money to give to the seller? You got it from the bank. You made a second contract agreement with the bank to borrower money in exchange from your promise to pay that money back, with interest. The agreement is known as the Mortgage and the Note is your IOU, the proof (receipt if you will) that you received the money from the bank.

A foreclosure, is simply a civil action where the bank claims you failed to keep your promise to pay as agreed to in the Mortgage. The Bank claims that since you broke your promise the bank wants to cancel the mortgage contract early and, in addition, wants a money judgment for the amount it lent you plus the interest as agreed to.

Now, if the Court determines that you broke your promise and the bank is entitled to get its money back, the Court will give the Bank a money judgment, just like you see on those Court TV shows.  Now, if you have the money to pay off the judgment, that’s it, you keep your house. However, most people do not have several hundred thousand dollars to pay off the money judgment. This is where the Mortgage as a lien on the property comes in. The Bank will ask the Court to sell the house and the money from the sale will be used to pay off the money judgment. It is only after the Court agrees to have the house sold, and then the house is actually sold, will your ownership in the house end. Over the last 10 years, foreclosure cases have taken months and even years to go from start to finish meaning ownership stayed with the homeowner over those months and years.

Understanding what a foreclosure is can reveal many rights and even defenses against the foreclosure. You see, the Courts use legal standard, not moral standard. Therefore, just because you morally feel the bank should get the money judgment, the Court will still require the Bank to prove every statement it makes in the complaint; from the existence of the Agreement; to showing that you broke your promise; to establishing it had complied with its promises under the agreement and those requirements set by law.  If the bank fails to prove every statement the Court will not give them a money judgment. This is your right and protection under the law.

If you are facing a foreclosure litigation or have already been served with a complaint, contact the Law Office of Maggio & Meyer. Our Long Island foreclosure attorneys take pride in our ability to defend homeowners. We believe in helping our clients before during and after foreclosure.

Please note that this series was created with New York State and its legal system in mind. The material found in this series may be applicable to other judicial and non-judicial states. However, consultation with experts in your state is recommended.