Beating foreclosure: Long Island family wins case after 16-year fight

Hallie Maggi was walking back from her lunch break on a recent Wednesday when her lawyer called with news she had been waiting 16 years to hear.

"It's over," he said.

A state appellate court ruled in late May that Maggi and her husband Steven owned their home free and clear of any mortgage — ending a foreclosure saga that began in May 2010 in the middle of the country's financial crisis.

Since then, Maggi has watched her school-age sons become men, welcomed new nieces and nephews and grieved the loss of her mother. Through it all, the family has been living in their Hauppauge house not knowing whether their home was truly theirs. Maggi borrowed from her retirement savings to cover the tens of thousands in legal fees.

"We took care of our house with the goal it's going to be ours one way or another," Maggi said. "I had to remain positive I'm winning this — or I wouldn't have stuck with it all this time."

Maggi's mortgage holder, U.S. Bank Trust N.A., may appeal to New York's highest court, which must decide whether it would take up the case. But the recent appellate court ruling marks the family's most significant legal victory after nearly two decades in limbo.

"Assuming they don't appeal, this house is my future," Maggi said. "This is my retirement — whether I stay here or sell it to retire."

The Maggis' case represents an extreme example of the lingering effects of the Great Recession in New York's lengthy judicial foreclosure system. New York ranks third nationally in the length of foreclosure cases — at an average of more than five years — according to the latest data from real estate data provider ATTOM. 

The Maggis are the beneficiary of New York's Foreclosure Abuse Prevention Act, passed in 2022, which gave homeowners greater leverage in foreclosure cases. The law, which Maggi personally rallied behind, set stricter rules around the state's six-year statute of limitations in judicial foreclosure cases.

It aimed to undo a 2021 ruling by New York's highest court that allowed mortgage companies to unilaterally stop and start cases, allowing them to reset the clock on the statute of limitations.

Banking groups fought the law's passage and have unsuccessfully challenged it in court, arguing the law harms mortgage lenders, and New York State should not have been able to apply it retroactively to older foreclosure cases that hadn't reached a conclusion.

New York's Court of Appeals upheld the law in a key decision last November. The U.S. Supreme Court declined last year to hear a case, U.S. Bank N.A. v. Fox, that argued the law violates the U.S. Constitution. 

The legal decisions affect thousands of loans.

In an amicus brief to the U.S. Supreme Court, several legal industry trade groups said they found $1.2 billion in mortgages across 7,100 loans in New York tied to foreclosure cases that had been dismissed, according to the groups' survey of seven loan servicers. The total size of New York's mortgage market last year was $645 billion, according to the brief.

A spokeswoman for U.S. Bank declined to comment. She said U.S. Bank appeared in the case as a trustee of the mortgage-backed security trust that owns Maggi's mortgage. 

Maggi's case shows the law is working as intended, said Assemb. Michaelle Solages (D-Elmont), who urged Gov. Kathy Hochul to sign the bill in 2022 as chair of New York State Black, Puerto Rican, Hispanic & Asian Legislative Caucus.

"Sixteen years is a very long time to fight foreclosure and that shouldn't be the norm," Solages said. "We support that law because it brings clarity, fairness and finality so families are not left in limbo."

'Why are they serving me again?'

The Maggis missed their first mortgage payment in 2009 after their income suddenly dropped while Hallie was working a commission-based job in equipment finance and Steven was working as a truck driver.

The couple had purchased Steven's parents' home in 1999 and refinanced their mortgage in 2005. At the time of the foreclosure, their fixed-rate loan had a balance of $342,000.

Maggi said she had worked out a repayment plan with her mortgage company and asked for an extension when she went into default.

"I never intended not to pay my mortgage," she said. "I was paying when I went into foreclosure." 

But instead, in May 2010, Everhome Mortgage Co. filed a foreclosure case — and then filed a second foreclosure case over the same loan in August 2010.

"Why are they serving me again?" Maggi remembered thinking at the time.

That question has never been clearly answered in court papers. The company discontinued the first case in September 2010. A Suffolk judge dismissed the second filing in 2013 after the company failed to make certain court filings.

At that time, Maggi said she was receiving calls and letters from companies seeking to buy her house before it was foreclosed on — even though the cases were seemingly over.

"Once your name is on a foreclosure list, you get calls from everyone — 'we'll buy your house cash, we'll get you out of this,' " she said.

Maggi was part of a tidal wave of foreclosures in 2010, overwhelming New York's court system and crashing the U.S. housing market.

Homeowners often find it's not easy to catch up even after missing a single mortgage payment, said Michael Wigutow, supervising attorney at Legal Services of Long Island, which provides free legal aid to homeowners.

"The meter keeps running, and the debt runs up day by day," he said.

The number of new foreclosure cases on Long Island has plummeted since the subprime mortgage crisis. There were 188 foreclosure starts in May on Long Island, according to ATTOM. That's 70% below the monthly average of 634 since April 2005. 

Several factors have led to a national decline in foreclosure rates, said Rob Barber, CEO of Irvine, California-based ATTOM. Rising home prices have given homeowners greater flexibility to work with lenders when they experience hardship. In addition, tighter lending standards and stronger borrower credit quality have both contributed to fewer foreclosures, he said.

"Rising home prices and the resulting growth in homeowner equity have played a major role in keeping foreclosure starts below pre-pandemic levels," Barber said.

Fighting back

After years of receiving confusing letters and phone calls, Maggi sought to resolve her foreclosure saga once and for all. In 2019, Maggi sued Ditech Financial, her mortgage holder at the time. The goal was to remove the company's lien from the property, so the Maggis wouldn't have an issue if they chose to sell or refinance. 

While the mortgage company had never refiled a case after the 2013 dismissal, Maggi's attorney Justin F. Pane told the family it could do so at any time, leaving their home in jeopardy. 

Suffolk Supreme Court Justice Kathy G. Bergmann ruled in the Maggis' favor on Feb. 17, 2021, and directed the Suffolk County clerk to cancel the mortgage. 

But the very next day, a major ruling by the state Court of Appeals threw her victory into jeopardy. The decision in Freedom Mortgage Corp. v. Engel provided an opening for the Maggis' mortgage holder — which had again changed to a trust associated with U.S. Bank — to file an appeal.

"Engel created havoc for homeowners throughout the state," Pane said. 

New law offers hope

The following year, Maggi began lobbying for the consumer-friendly foreclosure law, writing letters to state senators and Hochul to get the bill passed.

"I stuck them in envelopes and mailed them and I would put on social media, 'You've got to contact this person. This law has to be passed. It's not right for the lenders to be able to do this,' " she said.

Hochul signed the law on Dec. 30, 2022, and Maggi was hopeful that would end her saga. 

Foreclosure cases do not have to conclude within six years under the law. Rather, the statute of limitations bars mortgage companies from filing a new foreclosure case more than six years after a lender had demanded repayment in full. 

The law helped cement Maggi's legal victory. In late May, a New York appeals court affirmed that the 2022 foreclosure law can be applied retroactively, writing in its decision that arguments made by Maggi's mortgage holder, U.S. Bank Trust N.A., were "without merit."

"Their legal argument was shattered by FAPA," Pane said. 

Lenders and their attorneys continue to oppose the law. The stricter rules hurt borrowers by incentivizing lenders to move quickly and spend less time working out potential solutions with consumers, said Brian McGrath, an attorney and partner at the Manhattan firm Hinshaw & Culbertson LLP, who frequently represents lenders and loan servicers.

"There is this new time pressure to financial institutions to constantly be moving the foreclosure toward completion," he said. 

State Sen. Mario R. Mattera (R-St. James), who represents the district where the Maggis live, said he's glad his support for the law protected families in his district.

"This victory by this family is proof that the 2022 change was correct and needed," he said in an emailed statement to Newsday. 

Maggi said she's proud to have been involved in the fight to pass the law. But she still wants to know for certain New York's highest court will not take up U.S. Bank Trust's appeal. 

"I want to know their name is off my title," she said. "I'm still holding my breath a little bit."

Newsday's Laura Mann contributed to this report.