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(347)-508-9316On December 30, 2022, Governor Kathy Hochul signed into law the Foreclosure Abuse Prevention Act (“FAPA”) (A7737B). Originally introduced by Senator James Sanders, Jr. on March 8, 2021, FAPA spent nearly two years moving through New York’s legislative process. The act was a direct response to the Court of Appeals decision in Freedom Mtge. Corp. v. Engel (37 NY3d 1 [2021]), leading many to refer to FAPA as the “Anti-Engel Bill.”
With FAPA’s passage, many mortgage liens have been rendered time-barred under New York’s six-year statute of limitations for mortgage foreclosures. This article examines the current state of New York foreclosure law and how FAPA has reshaped the legal landscape.
I. Understanding the Statute of Limitations in
A statute of limitations establishes a deadline for filing lawsuits after a triggering event. Under New York law (CPLR § 213[4]), the statute of limitations for mortgage foreclosure is six years. However, mortgage agreements often span 15–30 years, leading to confusion about how the statute of limitations applies to foreclosures.
The statute of limitations impacts mortgage foreclosures in two key ways:
- Installment Contracts: A mortgage is an installment contract, meaning each missed payment constitutes a separate breach. If a borrower fails to make a payment on January 1, 2010, for example, the lender has until January 1, 2016, to file a foreclosure action based on that missed payment.
- Acceleration of Debt: Mortgage agreements often grant lenders the right to accelerate the loan upon default. Acceleration makes the entire loan balance immediately due, triggering the six-year statute of limitations on the full amount. If the lender fails to file a foreclosure action within six years of acceleration, the mortgage debt becomes time-barred.
II. How Lenders Accelerate Mortgage Debt
A key legal issue in foreclosure cases is whether and how a lender accelerates a loan. Acceleration can occur through:
- Filing a Foreclosure Complaint: Under both Engel and FAPA, filing a foreclosure lawsuit seeking full payment of the loan is sufficient to accelerate the debt.
- Notifying the Borrower: A lender can also accelerate by sending notice to the borrower, but merely stating an intent to accelerate in the future is insufficient.
Because many loans have prior foreclosure actions dating back to the 2007–2010 subprime mortgage crisis, it is likely that a prior complaint accelerated the loan, thereby starting the six-year limitations period.
III. Revocation of Acceleration Before FAPA
Before FAPA, lenders could unilaterally revoke acceleration and reset the statute of limitations. Under Engel, a lender could simply discontinue its foreclosure action within six years of acceleration, effectively erasing the statute of limitations period and allowing a new foreclosure action at any time.
FAPA eliminates this practice, preventing lenders from manipulating the statute of limitations by discontinuing lawsuits.
IV. How FAPA Alters the Foreclosure Statute of Limitations
FAPA amends provisions of the Real Property Actions and Proceedings Law (RPAPL), Civil Practice Law and Rules (CPLR), and General Obligations Law (GOL) to prevent lenders from evading the six-year limitations period.
Key changes under FAPA include:
- Irrevocability of Acceleration: Once a lender accelerates a mortgage, it cannot later revoke acceleration to reset the statute of limitations.
- Restriction of the Saving Statute (CPLR 205[a]): The saving statute previously allowed lenders to refile foreclosure actions within six months of dismissal, provided the case was not dismissed on jurisdictional grounds or decided on the merits. FAPA further limits this statute by allowing only the original plaintiff to refile, which is problematic in cases where loans have been transferred to new lenders.
V. Future Implications of FAPA
Since 2016, foreclosure statute of limitations law in New York has been in flux. While FAPA aims to provide clarity, it will likely lead to extensive litigation as lenders and borrowers navigate its implications.
Conclusion
The Law Office of Ronald D. Weiss, P.C. specializes in foreclosure litigation and provides legal guidance to lenders, junior lien holders, and borrowers. Contact our office today to discuss how FAPA affects your foreclosure rights and obligations.
