John Gakanga

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Introduction

How do we really define the procedure of foreclosure in the state of New York? The terms of acceleration” and “de-acceleration” are defined within the context of the process of foreclosure through judicial or non-judicial means. By definition, foreclosures are defined as legal disputes between lenders and borrowers when the borrower or borrowers of a certain house default on a payment they are obliged to pay for. In the case of New York, this is often followed up in the case of the lender by them taking “overt action” to demand immediate and full payment which triggers the beginning of the Statue of Limitations (SOL). In reality however, the more common method of foreclosure is filing of the foreclosure action resulting in a legal recognition and commencement of the SOL from the lender.

The implementation of this method came about from a ruling in February 2021 with the decision made in Freedom Mortgage Corp. v. Engle case which was done in an effort to clearly define foreclosure actions in a court of law. As a result, the Foreclosure Abuse

Prevention Act was implemented to systemize these adjustments and change the interaction and legal rights that both borrowers and lenders had. But looking at the drastic changes brought to courts and the issue of clear definition in addition to the problem of its alignment with the constitution, it is important to once again review and see the still prominent problems that are brought about by the existence of the FAPA and the improvements that should be made to make foreclosure as feasible as possible.

The Definition of Acceleration and the Issues It Presents In New York Law

Usually, an acceleration clause is said to be used when a person defaults on a loan they are supposed to pay the lender at a certain point. The term is known as acceleration because the lender essentially accelerates the time between when the loan was signed and when the payment is supposed to be completed based on the defined period. The debt is usually asked for in the form of a single payment. It is crucial to note that other violations or breached contractual agreements can lead to the use of acceleration such as selling the house without the lender’s permission.

In most contracts, a breach letter can be sent to the borrower after they default, giving them a notice to ensure a reminder that the borrower should pay for the loan. Acceleration is usually important as it triggers the SOL, with a set amount of time, which ensures that while the borrower does not get away with the default, the lender is also kept within certain boundaries to not misuse their legal authority at the same time. It is also used under the claim that the acceleration triggers the SOL so as to see to it that the accusation by the lender is legitimate and the lawsuit is handled in a timely way so as to prevent false accusations.

Based on this information, it is a feasible answer to claim that the use of acceleration to trigger the SOL is the way the issue should be handled but a number of problems surface when using this method. When looking at the process of acceleration, there are five steps mentioned. The steps are: Lender files summons and complaint, affidavit of service, request for judicial intervention, attorney affirmation, borrower filing an answer, mandatory settlement conference, litigation/discovery phase, and the trial. It is of course custom for the lender to present his complaint, but in the process of doing so, it should not be that the government immediately approves of the event without further inquiry and investigation.

The reasoning behind this statement is that even though the borrower might be required to give an answer to the government for the reason behind defaulting on the mortgage, it can often be the case that the borrower is likely facing a tough financial period that does not allow them to be able to take care of themselves or their families. In the last decade, it is said that the rate of poverty in New York has been around 13.9 percent due to the effect of the pandemic, loss of jobs, inflation, crime rates, and lack of ability to make a living due to status or age.

While government assistance can often serve in the case of helping the people who are struggling to help themselves, there are always issues of other potential costs restricting and impacting residents in a straining manner. While it can be argued that some of the tenants or borrowers might default on their money due to their lack of accountability for the funds they have, it is also apparent that it has become increasingly hard to obtain food and other commodities at affordable prices without even mentioning the drastic increase in housing costs, education, and other sectors of the society in New York even if those who live in poverty are excluded from any surveys or demographics.

In addition to this factor, the triggering of the SOL through filing a complaint can often trap the borrower in a position where they are under obligation to defend themselves against the lender without any potential reason for discovery of the underlying problem that caused the borrower to default without reason. Also, the need for a conference between a lender and borrower can cause problems in that the lender might potentially decide to refuse to amicably reach an agreement, deciding to instead bypass that step in effect and refuse any form of defense from the borrower if it lacks merit so that he can be able to trigger a lawsuit since in the case of that action, they have the advantage in spite of the borrower’s willingness to carry out a discussion for agreement and provide sufficient evidence for their case.

In response to these potential problems, I believe that it is important for the courts to first only commence the SOL when all other solutions have not worked and there is no choice but to go to a trial to handle the lawsuit and deal with both sides. In addition, the borrower should be able to counter the denial of the lender with a challenge of proof to show that the defense lacks merit through the legal sources for him to use and the material he has instead of just simply making the evidence null and void when presented from the borrower.

Before commencing the trial, there should be the participation of investigation boards that can be able to gather evidence from both sides and extract all the possible information from the occurring events in order to be able to provide a full picture of the possible sequence of events that might have actually taken place without the existence of potential bias from both sides due to their efforts to derive the best outcomes for their own selves. While the argument of corruption and bribery can surface due to such approaches, it is one way to address the permission all the parties involved have and bring about the necessary balance of power needed so that the case has the least chance of a wrong outcome.

The Definition of De-acceleration in Post-FAPA

The issue of de-acceleration is one that has become prominent especially after the decision that was made in the Engels case after the creation of FAPA to deal with such cases. One of the decisions made in that case based on the law was that the foreclosure SOL stops operating when the lender voluntarily dismisses the case meaning that the borrower can have a chance to miss out on their obligatory payments if dismissed by the lender.

According to some critics, this can give the borrowers leeway to use potentially questionable methods to push lenders to a point of giving in and create a pattern of payment defaults of which result in no solid action being taken. While this can be one way to end the lawsuit with the lender not being paid, I believe the other alternative should be when there is evidence that the borrower actually paid but the lender either mishandled the payment or never searched for it where it was and based on that lack of searching assumes that the payment was never made. At the same time, the case should always be that under a certain period of time, after a period of at least 3 months or so, a lawsuit can be brought back again as long as the claim is legitimate and the original SOL time can still be applied to the situation.

Alternatively, there are some suggested forms of bringing about a conclusion for the end of SOL of foreclosure actions. The first potential outcome is to have a mutually agreed decision to end the SOL as a form of settlement without any foreclosure action. In the case of this result, I agree with the idea of reaching a mutual agreement of ending the case but it should lead to a result in which the house is given back to the lender as a result in order to ensure the prevention of another problem resurfacing between the borrower and the lender in their respective operations. The main reason as to why I agree with this result is that both the lender and borrower cannot make a decision for themselves ensuring that the requirements of both parties are met.

It can also be that the decision to reach a mutual agreement with foreclosure can be a feasible action to shorten the amount of time on a case provided that the borrower actually has the means to fully pay for the payments they defaulted on without an issue. This can count due to the fact that the agreement can demand that the claim of voluntary dismissal be still used but with the caveat of including a payment to deal with the lack of payments being provided as it should have been. The methods of payment can be: loan modifications, forbearance, or a temporary plan being put in place.

A unilateral decision on the lender’s side to dismiss the arrears can be held in place to ensure that the problem isn’t revisited again should the lender change their minds. However, at the same time, borrowers should still be held accountable for what they have not paid for and should be charged through either a recuperation pay for their defaults or if able to pay back the amount, have a payment plan over the remaining SOL time to pay an agreed amount of money to the lender to minimize damage as much as possible.

Another potential cause of action is to have a result in which the borrower can bring forth a petition to dismiss the foreclosure being held against them. I also agree with this outcome because as proven in the previous statement, in spite of the borrower providing sufficient evidence to offer a solid defense for the reason behind their defaults, the lender can refute their statements without a justifiable cause leading to a case that ends in their success leaving the borrower to pay an amount that they shouldn’t have to pay. However, this course of action should only be carried out when the courts are able to find a piece of evidence that is undeniable if found within the period of trial that if taken into consideration effectively dismisses the issue of payments that haven’t been met. This prevents a counter statement from the lender that can potentially resurface the issue due to unclear facts or contradicting evidence.

Lastly, the idea of the court dismissing the case through a foreclosure without the participation of either party is a way to resolve the crisis at hand. This can particularly happen when the presentation on both sides leads to a block in progress that does not bring about any form of approach to a conclusion or clear verdict in the case of the payments needed to be made. However, the best way to handle such a scenario should be through a jury of which holds a consensus discussion and arrives at a conclusion or vote that is implemented through the decision of the majority which can be used to dissolve the SOL with the approval of the court after the case is solved and dealt with. Part of the FAPA’s implementation was to prevent the lender from having full authority to commence a foreclosure ensuring a fair judgment from all perspectives of the Act.

Conclusion

In conclusion, we see that the use of the terminology of acceleration and de-acceleration is a topic that can bring about many controversial aspects and contradictions that are even highlighted more by the heavy contrast brought about due to the implementation of FAPA in judicial rulings and trials. We come to see that the definition of foreclosure can be vague in that it can be applied to the beginning of an SOL, and yet also only come into play at the end of a trial or series of trials in which the lender, court, or borrower can each have their own part in ensuring that the case is ended under potentially fair and just terms with the introduction of more laws to ensure the whole process is as applicable as possible.

When looking at the results of the use of FAPA in court cases to do with foreclosure, the end result is that all pending cases or cases that were facing a ruling went through drastic changes due to the nature of the new act which was both good and bad according to a case by case scenario. The nature of the act brings into question both its constitutionality and its retroactive ability in previous cases in both the appellate and supreme courts.

While it comes with some needed revisions and required studies to check the historical rights of both lenders and borrowers, it comes a step closer to resolving the essential root causes which makes the process of foreclosure to be strenuous and reduces the chance of misinterpretation at all levels of the court system in New York from acceleration to de-acceleration.

Works Cited

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https://chambers.com/articles/acceleration-clauses-in-foreclosure-actions-new-rules Biddle, B. (2021, April 1). New York clarifies Mortgage Loan Acceleration and

De-Acceleration: Starting and Stopping the limitations clock | Financial Services Perspectives. Financial Services Perspectives. https://www.financialservicesperspectives.com/2021/04/new-york-clarifies-mortgage-loan-acceleration-and-de-acceleration-starting-and-stopping-the-limitations-clock/

Fees, fines and fairness. (n.d.). Office of the New York City Comptroller Brad Lander. https://comptroller.nyc.gov/reports/fees-fines-and-fairness/

Long Island Bankruptcy & Foreclosure, Law Firm. (2024, March 29). What is the Statute of Limitations in a New York State Foreclosure Case? What is Quiet Title? What is the Engel Decision? What is the NYS Foreclosure Abuse Prevention Act? What is the New Foreclosure Law in New York?Long Island Bankruptcy & Foreclosure | Law Firm. https://www.ny-bankruptcy.com/what-is-the-statute-of-limitations-in-a-new-york-state-foreclosure-case-what-is-quiet-title-what-is-the-engel-decision-what-is-the-nys-forecl osure-abuse-prevention-act

Loftsgordon, A. (2024, May 30). What is an acceleration clause? www.nolo.com. https://www.nolo.com/legal-encyclopedia/what-is-an-acceleration-clause.html

Loftsgordon, A. (2024, February 2). Your options to avoid foreclosure. www.nolo.com. https://www.nolo.com/legal-encyclopedia/options-to-avoid-foreclosure.html

Loftsgordon, A. (2024, February 2). Your options to avoid foreclosure. www.nolo.com. https://www.nolo.com/legal-encyclopedia/options-to-avoid-foreclosure.html

Loftsgordon, A. (2023, April 3). Can I lose my home to foreclosure if I transfer the property to a new owner? www.nolo.com.

https://www.nolo.com/legal-encyclopedia/can-i-lose-my-home-to-foreclosure-if-i-transfer-the-property-to-a-new-owner.html

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https://www.osc.ny.gov/reports/new-yorkers-need-look-poverty-trends-new-york-state-last-decade

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