Foreclosure Abuse Prevention Act – NYS 2023

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Background and History 

The Foreclosure Abuse Prevention Act (the “FAPA”) (Senate Bill S5473, passed May 3, 2022, and the companion Legislature Bill A7737) was signed into law on December 30, 2022 by New York State Governor Kathy Hochul. The new statutory law, like the judicial case law as in Court of Appeals decisions like Freedom Mortgage Corp. V. Engel, 37 NY3d 1 (2021), is both a substantial and debated change on prior law and thinking in as to New York State foreclosure law in general, and the statute of limitIons law for foreclosures in particular. Because foreclosure law entails many political, economic and social considerations that post-pandemic in New York State are very relevant, that this new law, will continue to raise issues over time with our state’s courts struggling to interpret all of law’s ramifications. However, the reality is that the new law is bold and clear in its intent, which is to preserve the six (6) year statute of limitations for foreclosure as a strict time limit and to send a message to our state’s courts that foreclosure plaintiffs need to be treated like other plaintiffs who need to abide strictly by a statute of limitations that they cannot unilaterally change. While the mortgage industry and their supporters have seen the new law as an overreach into their rights to de-accelerate, voluntarily dismiss and/or pause their own actions and have argued that these changes would limit their ability to help borrowers in default on their mortgage, the reality is these rights were not being assailed in the FAPA, rather what was being challenged and changed was the use by lenders of these concepts in order to manipulate and expand the statute of limitations in a manner no other plaintiff in our judicial system was allowed. While lenders and their allies may feel that the new law singles them out, it only does so because under Engel and related decisions and case law, foreclosure plaintiffs were being given by the courts undue advantages over homeowners in distress that no other group of plaintiffs were accorded. Therefore, while the exact procedural meaning of every statutory amendment in the new law can be debated, what should not be debated is the legislative intent which is clear in the name of the Act, where our state’s elected legislatures made it very clear that this law was necessary to prevent our state’s courts from engaging  in decisions that misinterpreted the statute of limitations for foreclosures by giving lenders judicially advantages never intended by our state’s legislative and executive branches.  

Legislative History/ Intent 

The Legislation shows a reaction by the legislature at what they clearly defined as ‘abuses of the judicial foreclosure process” which they describe as lender and judicial overreach leading to a wrong interpretation of the F. SOL. Want even playing field for foreclosures; lenders should not be empowered by courts to effectively extend and control a SOL set by the legislature at 6 years. Feeling that the courts were allowing advantages to mortgage lenders that they were not giving to any other group of plaintiffs.

The Senate Bill, which was signed by the Governor without any cha nges makes it’s intentions very clear right in the beginning in a section called “Purpose and Intent of Bill”. This section states the the Legislature finds a problem with mortgage lenders abusing the judicial process, with the courts adding to that problem with court with decisions which do not follow the intent of legislature, thereby creating an unfair playing field for homeowners in distress in the state. The Purpose Section states as follows:

PURPOSE AND INTENT OF BILL:

The Legislature finds that there is an ongoing problem with abuses of the judicial foreclosure process; that the problem has been exacerbated by court decisions which, contrary to the intent of the Legislature,
have given mortgage lenders and loan servicers opportunities to avoid strict compliance with remedial statutes and manipulate statutes of limitation to their advantage; . . . .

The remedial aim of the bill is to thwart and eliminate abusive and unlawful litigation tactics that have been employed by foreclosure plaintiffs to the prejudice of homeowners throughout New York. That some of these tactics have been sanctioned by the judiciary has resulted in perversion of longstanding law and created an unfair playing field that favors the mortgage banking and servicing industry at the expense of everyday New Yorkers.”

The Senate Bill, then has a section called “Justification”, which gives more detail as the specific general thinking of the NYS Senate with this Bill. This section in addition to explaining the intent of the Legislature, gives a justification for the Bill as follows: (1) The Court of Appeal decision in Engle gave foreclosure plaintiffs the unilateral and unhindered ability to manipulate their own statute of limitations period which is inherently unfair because no other litigation plaintiffs have this advantage; (2) Engel has created a tremendous amount of unnecessary litigation and uncertainty with lenders reopening old statute of limitations dismissals based on what was believed to be a change and clarification of the law in Engel that lets mortgage lenders have the ability to control their own statute of limitations; (3) The FAPA is remedial legislation seeking to level the playing field for all parties in foreclosure litigation to make sure the statute of limitations applies fairly to everyone and is not subject to manipulation by lenders and misapplication/ misunderstanding by the courts; (4) The FIFA was passed to enforce the goal of the statute of limitations which is to have an endpoint to the ability to litigate, to deal with matters consistently, evenhandedly and fairly. The Justification Section states in part:

“JUSTIFICATION:

There is an urgent need to pass this bill to overrule the Court of Appeals’ recent decision in Freedom Mtge. Corp. v Engel (37 NY3d 1 (2021) (“Engel”). Engel effectively put the ability to unilaterally manipulate, arrest, stop, and restart the limitations period prescribed CPLR 213 (4), at will, directly in the hands of mortgage foreclosure plaintiffs and their servicers, to the clear detriment of New York home-owners. No other civil plaintiff in this state is extended such unilateral and unfettered powers. As a direct result of Engel, trial and appellate courts throughout the State have been bombarded with a flurry of motions made by mortgage lenders and servicers to re-open cases, some having been dismissed years ago on statute of limitations grounds, on the basis that Engel represents a change or clarification in the decisional law that, in effect, not only exempts mortgage foreclosure plaintiffs from having the statute of limitation applied to them, but gives them unilateral and unbridled control to manipulate calculation of the six-year period provided under CPLR 213 (4) . . . . .

Accordingly, this remedial legislation seeks to level the playing field for all parties engaged in litigation involving mortgage related real property instruments and ensure the statute of limitations not only
applies equally to all, but is impervious to unilateral manipulation. In doing so, the bill aims to further clarify and reaffirm the legislative intent of a wide spectrum of laws that have been: (1) manipulated and
abused by mortgage lending and servicing institutions; and (2) misunderstood and/or misapplied by the courts.. . . .

The Legislature recognizes that “statutes of limitation not only save litigants from defending stale claims, but also ‘express a societal interest or a public policy of giving repose to human affairs’ . . . . 

Therefore, the consistent and evenhanded enforcement of the statute of limitations advances the interests of litigants, relieves burdens on courts, and is a matter of fundamental fairness.”

Changed Provisions

The FAPA is not a law created new out of whole cloth, or completely new statutory sections added to an existing set of laws. Rather, despite the bold approach of the law, it adds subsections to and revises existing law to avoid ambiguity and misunderstanding that has caused what it considers judicial misconstruction of legislative intent.. These are not completely new laws but statutory clarification to the existing laws that deal with foreclosures. The new subsections are as follows:

 

1. RPAPL 1301 Separate Action For Mortgage Debt – RPAPL(3)(REVISED) and RPAPL(4)(ADDED) – 

This section was revised to avoid a multiplicity of foreclosure actions by requiring that before a second action is commenced to recover any part of the mortgage debt, including and action to foreclose, that leave of the court be obtained, as a condition precedent to starting any new action. Without such Court approval, the defendant can defend the second action and move to dismiss the former action. 

The former, pre-FAPA version of RPAPL 1301(3) stated as follows:

3. While the action is pending or after final judgment for the plaintiff therein, no other action shall be commenced or maintained to recover any part of the mortgage debt, without leave of the court in which the former action was brought.

The post-FAPA version of RPAPL 1301 with the revised 1303(3) and the added 1303(4) was changed as of January 6, 2023 to state as follows:

3. While the action is pending or after final judgment for the plaintiff therein, no other action shall be commenced or maintained to recover any part of the mortgage debt, including an action to foreclose
the mortgage, without leave of the court in which the former action was brought. The procurement of such leave shall be a condition precedent to the commencement of such other action and the failure to procure such leave shall be a defense to such other action. For purposes of this subdivision, in the event such other action is commenced without leave of the court, the former action shall be deemed discontinued upon the commencement of the other action, unless prior to the entry of a final judgment in such other action, a defendant raises the failure to comply with this condition precedent therein, or seeks dismissal thereof based upon a ground set forth in paragraph four of subdivision (a) of rule thirty-two hundred eleven of the civil practice law and rules. This subdivision shall not be treated as a stay or statutory prohibition for purposes of calculating the time within which an action shall be commenced and the claim interposed pursuant to sections two hundred four and two hundred thirteen of the civil practice law and rules.

4. If an action to foreclose a mortgage or recover any part of the mortgage debt is adjudicated to be barred by the applicable statute of limitations, any other action seeking to foreclose the mortgage or recover any part of the same mortgage debt shall also be barred by the statute of limitations.

2. GOL 17-105 Promises and Waivers Affecting the Time Limited for Action to Foreclose a Mortgage – GOL 17-105(4)(REVISED)-(5)(REVISED)-

This section was revised to make it more difficult for a foreclosure defendant to waive or stipulate out of the requirements of the foreclosure statute of limitations. Often in the past foreclosure plaintiffs, realizing that the statute of limitations was at risk, would offer the foreclosure defendant a trial modification and/or a stipulation to dismiss the the foreclosure action, with the purpose that was not explained clearly to the defendant, that the defendant was waiving their rights to declare the statute of limitations expired. The original version of GOL 17-105 (4)-(5) was somewhat convoluted and filled with many more ambiguities about the ability of promises and waivers to affect the time limited for a foreclosure. 

The former, pre-FAPA version of GOL 17-105(4)-(5) stated as follows:

This section was revised to make it more difficult for a foreclosure defendant to waive or stipulate out of the requirements of the foreclosure statute of limitations. Often in the past foreclosure plaintiffs, realizing that the statute of limitations was at risk, would offer the foreclosure defendant a trial modification and/or a stipulation to dismiss the the foreclosure action, with the purpose that was not explained clearly to the defendant, that the defendant was waiving their rights to declare the statute of limitations expired. The original version of GOL 17-105 (4)-(5) was somewhat convoluted and filled with many more ambiguities about the ability of promises and waivers to affect the time limited for a foreclosure. 

The former, pre-FAPA version of GOL 17-105(4)-(5) stated as follows:

4. Except as provided in subdivision five, no acknowledgment, waiver or promise has any effect to extend the time limited for commencement of an action to foreclose or mortgage for any greater time or in any other manner than that provided in this section, nor unless it is made as provided in this section.

5. This section does not change the requirements, or the effect with respect to the time limited for commencement of an action, of

a. a payment or part payment of the principal or interest secured by the mortgage, or

b. a stipulation made in an action or proceeding.

The post-FAPA version of GOL 17-105 with the revised 17-105(4)-(5) was changed as of January 6, 2023 to state as follows:

4. An acknowledgment, waiver, promise or agreement, express or implied in fact or in law, shall not, in form or effect, postpone, cancel, reset, toll, revive or otherwise extend the time limited for commencement of an action to foreclose a mortgage for any greater time or in any other manner than that provided in this section, unless it is made as provided in this section.

5. This section does not change the requirements or the effect with respect to the accrual of a cause of action, nor the time limited for commencement of an action based upon either:

a. a payment or part payment of the principal or interest secured by the mortgage, or

b. a stipulation made in an action or proceeding.

3. N.Y. Civ. Prac. Law & Rules § 3217. Voluntary Discontinuance – CPLR 3217(e)(ADDED)-
CPLR 3217 is a section where there are guidelines as to when and how a plaintiff can unilaterally dismiss its own action. The former, pre-FAPA version of CPLR, lacked the new subsection 3217(e), which was added by the FAPA and specifically states that although the foreclosure plaintiff can dismiss their own action, there is nothing that the plaintiff can do to change the statute of limitations, which in a direct overruling of Engel, CPLR 3217(e) states that the dismissal does not change the accrual of the statute of limitations and that the concept of voluntary dismissal affecting the statute of limitations through, so called “de-acceleration” is incorrect and was never a power that was supposed to be bestowed on foreclosure plaintiffs.

The pre-FAPA version of CPLR 3217, without the 3217(e), stated as follows:

(a) Without an order. Any party asserting a claim may discontinue it without an order

1. by serving upon all parties to the action a notice of discontinuance at any time before a responsive pleading is served or, if no responsive pleading is required, within twenty days after service of the pleading asserting the claim and filing the notice with proof of service with the clerk of the court; or

2. by filing with the clerk of the court before the case has been submitted to the court or jury a stipulation in writing signed by the attorneys of record for all parties, provided that no party is an infant, incompetent person for whom a committee has been appointed or conservatee and no person not a party has an interest in the subject matter of the action; or

3. by filing with the clerk of the court before the case has been submitted to the court or jury a certificate or notice of discontinuance stating that any parcel of land which is the subject matter of the action is to be excluded pursuant to title three of article eleven of the real property tax law.

(b) By order of court. Except as provided in subdivision (a), an action shall not be discontinued by a party asserting a claim except upon order of the court and upon terms and conditions, as the court deems proper. After the cause has been submitted to the court or jury to determine the facts the court may not order an action discontinued except upon the stipulation of all parties appearing in the action.

(c) Effect of discontinuance. Unless otherwise stated in the notice, stipulation or order of discontinuance, the discontinuance is without prejudice, except that a discontinuance by means of notice operates as an adjudication on the merits if the party has once before discontinued by any method an action based on or including the same cause of action in a court of any state or the United States.

(d) All notices, stipulations, or certificates pursuant to this rule shall be filed with the county clerk by the defendant.

The post-FAPA version of CPLR 3217, with the added 3217(e), was changed as of January 6, 2023 to add subsection(e) as follows:

CPLR 3217(e) –

(E) EFFECT OF DISCONTINUANCE UPON CERTAIN INSTRUMENTS. IN ANY ACTION ON AN INSTRUMENT DESCRIBED UNDER SUBDIVISION FOUR OF SECTION TWO HUNDRED THIRTEEN OF THIS CHAPTER, THE VOLUNTARY DISCONTINUANCE OF SUCH ACTION, WHETHER ON MOTION, ORDER, STIPULATION OR BY NOTICE, SHALL NOT, IN FORM OR EFFECT, WAIVE, POSTPONE, CANCEL, TOLL, EXTEND, REVIVE OR RESET THE LIMITATIONS PERIOD TO COMMENCE AN ACTION AND TO INTERPOSE A CLAIM, UNLESS EXPRESSLY PRESCRIBED BY STATUTE.

 
4. CPLR 203 Method of Computing Periods of Limitation Generally – CPLR 203(h)(ADDED)-

In this section which deals with the computation of time periods in general, subsection (h) was added to make it clear that that once the statute of limitations for a foreclosure action starts to run, no party can stop the running of the statute of limitations or otherwise manipulate its timing.

The pre-FAPA version of CPLR 203, without the 203(h)), stated as follows:

§ 203. Method of computing periods of limitation generally.
(a)Accrual of cause of action and interposition of claim. The time within which an action must be commenced, except as otherwise expressly prescribed, shall be computed from the time the cause of action accrued to the time the claim is interposed.

(b) Claim in complaint where action commenced by service. In an action which is commenced by service, a claim asserted in the complaint is interposed against the defendant or a co-defendant united in interest
with such defendant when:

1. the summons is served upon the defendant; or

2. first publication of the summons against the defendant is made pursuant to an order, and publication is subsequently completed; or

(c) Claim in complaint where action commenced by filing. In an action which is commenced by filing, a claim asserted in the complaint is interposed against the defendant or a co-defendant united in interest
with such defendant when the action is commenced.

(d) Defense or counterclaim. A defense or counterclaim is interposed when a pleading containing it is served. A defense or counterclaim is not barred if it was not barred at the time the claims asserted in the
complaint were interposed, except that if the defense or counterclaim arose from the transactions, occurrences, or series of transactions or occurrences, upon which a claim asserted in the complaint depends, it is not barred to the extent of the demand in the complaint notwithstanding that it was barred at the time the claims asserted in the complaint were interposed……….

(g) 1. Time computed from actual or imputed discovery of facts. Except as provided in article two of the uniform commercial code or in section two hundred fourteen-a of this chapter, where the time within which an action must be commenced is computed from the time when facts were discovered or from the time when facts could with reasonable diligence have been discovered, …………..

The post-FAPA version of CPLR 203, added 203(h)), and was changed as of January 6, 2023 to state as follows:

(h) Claim and action upon certain instruments. Once a cause of action upon an instrument described in subdivision four of section two hundred thirteen of this article has accrued, no party may, in form or effect, unilaterally waive, postpone, cancel, toll, revive, or reset the accrual thereof, or otherwise purport to effect a unilateral extension of the limitations period prescribed by law to commence an action and to interpose the claim, unless expressly prescribed by statute.

5. CPLR 205 Termination of Action – CPLR 205A (ADDED) Termination of Certain Actions Related to Real Property CPLR 205 is a section where there are guidelines as to when and how a plaintiff can continue a new case after its termination. CPLR 205 has been used in the past as a justification to give plaintiffs an additional 6 months to bring a new action if the first action was dismissed past the statute of limitations. CPLR 205 was limited to actions that were not dismissed based on 4 reasons for dismissal where there was no 6 month extension: “ a voluntary discontinuance, a failure to obtain personal jurisdiction over the defendant, a dismissal of the complaint for neglect to prosecute the action, or a final judgment upon the merits.” These reasons were taken to mean that all reasons that were meritorious, usually did not get the extension, but a technical/procedural dismissal would get an extension of 6 months. During the 6 months the plaintiff would need to file its new action and complete service of process. The former, pre-FAPA version of CPLR 205, remains valid and in force and instead of amending it, the FAPA created another similar section, CPLR 205A, which is called “Termination of Certain Actions Related to Real Property. CPLR 205A, is stricter and broader than CPLR 205, and states for the 4 reasons for dismissal where there was no 6 month extension: “ A VOLUNTARY DISCONTINUANCE, A FAILURE TO OBTAIN PERSONAL JURISDICTION OVER THE DEFENDANT, A DISMISSAL OF THE COMPLAINT FOR ANY FORM OF NEGLECT, INCLUDING, BUT NOT LIMITED TO THOSE SPECIFIED IN SUBDIVISION THREE OF SECTION THIRTY-ONE HUNDRED TWENTY-SIX, SECTION THIRTY-TWO HUNDRED FIFTEEN, RULE THIRTY-TWO HUNDRED SIXTEEN AND RULE THIRTY-FOUR HUNDRED FOUR OF THIS CHAPTER, FOR VIOLATION OF ANY COURT RULES OR INDIVIDUAL PART RULES, FOR FAILURE TO COMPLY WITH ANY COURT SCHEDULING ORDERS, OR BY DEFAULT DUE TO NONAPPEARANCE FOR CONFERENCE OR AT A CALENDAR CALL, OR BY FAILURE TO TIMELY SUBMIT ANY ORDER OR JUDGMENT, OR UPON A FINAL JUDGMENT UPON THE MERITS. These reasons which appear in CPLR 205A, are much broader than CPLR 205, and now most situations of technical/procedural dismissals, under CPLR 205A, the dismissal would likely be deemed to be in the category that cannot obtain the 6 month extension. So now with CPLR 205A the division is between dismissals for almost every reason not getting the extension and ………

OLD version pre_FAPA:

205. Termination of action. (a) New action by plaintiff. If an action is timely commenced and is terminated in any other manner than by a voluntary discontinuance, a failure to obtain personal urisdiction over the defendant, a dismissal of the complaint for neglect to prosecute the action, or a final judgment upon the merits, the plaintiff, or, if the plaintiff dies, and the cause of action survives, his or her executor or administrator, may commence a new action upon the same transaction or occurrence or series of transactions or occurrences within six months after the termination provided that the new action would have been timely commenced at the time of commencement of the prior action and that service upon defendant is effected within such six-month period. Where a dismissal is one for neglect to prosecute the action made pursuant to rule thirty-two hundred sixteen of this chapter or otherwise, the judge shall set forth on the record the specific conduct constituting the neglect, which conduct shall demonstrate a general pattern of delay in proceeding with the litigation.

(b) Defense or counterclaim. Where the defendant has served an answer and the action is terminated in any manner, and a new action upon the same transaction or occurrence or series of transactions or occurrences
is commenced by the plaintiff or his successor in interest, the assertion of any cause of action or defense by the defendant in the new action shall be timely if it was timely asserted in the prior action.

(c) Application. This section also applies to a proceeding brought under the workers’ compensation law.

New version of CPLR 205A as follows:

CPLR 205A CPLR

W§ 205-A. TERMINATION OF CERTAIN ACTIONS RELATED TO REAL PROPERTY.

(A) IF AN ACTION UPON AN INSTRUMENT DESCRIBED UNDER SUBDIVISION FOUR OF SECTION TWO HUNDRED THIRTEEN OF THIS ARTICLE IS TIMELY COMMENCED AND IS TERMINATED IN ANY MANNER OTHER THAN A VOLUNTARY DISCONTINUANCE, A FAIL- URE TO OBTAIN PERSONAL JURISDICTION OVER THE DEFENDANT, A DISMISSAL OF THE COMPLAINT FOR ANY FORM OF NEGLECT, INCLUDING, BUT NOT LIMITED TO THOSE SPECIFIED IN SUBDIVISION THREE OF SECTION THIRTY-ONE HUNDRED TWENTY-SIX, SECTION THIRTY-TWO HUNDRED FIFTEEN, RULE THIRTY-TWO HUNDRED SIXTEEN AND RULE THIRTY-FOUR HUNDRED FOUR OF THIS CHAPTER, FOR VIOLATION OF ANY COURT RULES OR INDIVIDUAL PART RULES, FOR FAILURE TO COMPLY WITH ANY COURT SCHEDULING ORDERS, OR BY DEFAULT DUE TO NONAPPEARANCE FOR CONFERENCE OR AT A CALENDAR CALL, OR BY FAILURE TO TIMELY SUBMIT ANY ORDER OR JUDGMENT, OR UPON A FINAL JUDGMENT UPON THE MERITS, THE ORIGINAL PLAINTIFF, OR, IF THE ORIGINAL PLAINTIFF DIES AND THE CAUSE OF ACTION SURVIVES, HIS OR HER EXECUTOR OR ADMINISTRATOR, MAY COMMENCE A NEW ACTION UPON THE SAME TRANSACTION OR OCCURRENCE OR SERIES OF TRANSACTIONS OR OCCURRENCES WITHIN SIX MONTHS FOLLOWING THE TERMINATION, PROVIDED THAT THE NEW ACTION WOULD HAVE BEEN TIMELY COMMENCED WITHIN THE APPLICABLE LIMITATIONS PERIOD PRESCRIBED BY LAW AT THE TIME OF THE COMMENCEMENT OF THE PRIOR ACTION AND THAT SERVICE UPON THE ORIGINAL DEFENDANT IS COMPLETED WITHIN SUCH SIX-MONTH PERIOD. FOR PURPOSES OF THIS SUBDIVISION:

1. A SUCCESSOR IN INTEREST OR AN ASSIGNEE OF THE ORIGINAL PLAINTIFF SHALL NOT BE PERMITTED TO COMMENCE THE NEW ACTION, UNLESS PLEADING AND PROVING THAT SUCH ASSIGNEE IS ACTING ON BEHALF OF THE ORIGINAL PLAINTIFF; AND

2. IN NO EVENT SHALL THE ORIGINAL PLAINTIFF RECEIVE MORE THAN ONE SIX-MONTH EXTENSION. 

 
Essentially pre- FASA the 2d big way(besides boundary dismissal) lenders would avoid the SOL was this safe harbor clause. But now procedural/technical dismissals are being put into a broader category of “neglect” deeming many of these to be negligent dismissals which do not get the 6 month Safe Harbor. The 6 month extension is now much more limited and uncertain.

Also language was changes so seems more narrow as to whether 6 months after SOL expired or the 6 months need to be prior to SOL expiring for the 1st action and this only gives the right to bring a 2d but not a 3rd action.

6. N.Y. Civ. Prac. Law & Rules § 213(4)(a)-(b)

Nothing Lender Does Can Change SOL

Nothing Borrower Does Can Change SOL

Nothing Court Does Can Change SOL 

Safe Harbor Extension of 6 Months Severely Limited

No Multiplicity of Actions / Additional Foreclosure Actions After Initial Action Limited Retroactive Law? Applies Only Up to Judgment of Foreclosure and Sale?

What Does This All Mean?

Why Can the Law Office of Ronald Weiss, P.C. Help Us With Our Statute Of Limitations Issues and Otherwise Help Defend Our Foreclosure?

Our law office concentrates in foreclosure defense and often deals with the interfacing of complex fact patterns, legal arguments.