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BACKGROUND FACTS AND HISTORY : The State of New York (“NYS”) is a judicial foreclosure state (FN 1a) (FN 1b), where foreclosure actions need to be pursued in the form of a law suit, usually in front of the New York Supreme Court, which is the trial level court, where most legal matters, subject to state laws, are handled. Foreclosure actions in NYS, like any legal disputes, have a statute of limitations (“SOL”), which limits the time in which a legal action must commence (FN 2). The SOL is intended to prevent stale claims and therefore pressures a potential plaintiff to bring their dispute to court within a time designated and limited by state statute, and different causes of action have different statutes of limitation (FN 3). In NYS the SOL is six (6) years for foreclosure actions, under New York’s civil procedure statutory code, the Civil Practice Law and Rules (“CPLR”), Section 213(4) (FN 4), which states “The following actions must be commence within six years:…4. an action upon a bond or note, the payment of which is secure by a mortgage upon real property…”. Different states have different SOL’s for debt collection (FN 5). The SOL is commonly misunderstood. The SOL is not the length of a law suit. Rather, the SOL is the time in which the lender, after the SOL is triggered, takes to go to Court and start a legal action by filing a Summon and Complaint (FN 6).

What starts / triggers the SOL is different for each cause of action, but for NYS foreclosures it’s “acceleration” (FN 7). “Acceleration” is a legal term meaning that the lender has taken “overt action” to start a foreclosure action (FN 8). Acceleration is not a “default letter”, which just threatens a foreclosure action and demands the reinstatement (or cure) amount; rather acceleration is the actual, full and immediate demand for the entire payoff amount due to the Lender, in an “acceleration letter” and/or the actual commencement of the legal action (FN 9). The actual demanding of the immediate payment of the full balance due under the mortgage loan in an “acceleration letter”, is no longer common, so in reality, the actual acceleration of the loan, usually occurs in NYS with the filing in a foreclosure action, the summons and complaint, which initiate the legal action.

What ends the ticking of the SOL clock caused by acceleration has been subject to more controversy.  Until December 30, 2022, when the Foreclosure Abuse Prevention Act (“FAPA”) (FN 10a)(FN 10b) was passed by the NYS legislature and signed into law by NYS Governor Kathy Hochul, there was a concept called “de-acceleration” that was  accepted and explained by NYS’s highest court, the New York Court of Appeals, under the Freedom Mortgage Corp. v. Engle decision (the “Engle decision”) (FN 11), February 18, 2021, which consolidated four (4) appeals into one (1) comprehensive decision seeking to resolve issues concerning the SOL for foreclosure actions in NYS. The Engle decision firstly decided, based on mainstream precedent, that the NYS foreclosure six (6) year SOL starts to run, when the lender accelerates the mortgage loan with an “overt act”, which is usually the commencement of the foreclosure case. Secondly the Engle decision also decided, based on more contentious case law, the corollary, that the NYS foreclosure SOL stops running when the lender ends the foreclosure action, often with a voluntary dismissal, which the Engel decision held constitutes a “de-acceleration” of the mortgage. The Engel decision reasoned that if Lenders have the right through commencing a foreclosure action, to accelerate, then they logically must also have the right to do the opposite, which is to end the running of the NYS foreclosure SOL, through voluntary dismissal which constitutes a “de-acceleration” of the mortgage loan (FN 12). The Engel decision, which was decided in the middle of the Covid-19 pandemic, a time of financial uncertainty for many homeowners, was immediately politically controversial in NYS, in that it was considered to be law that overly favored mortgage lenders, by allowing mortgage lenders to have inappropriate control over the SOL, a time limit set by the NYS Legislature, which the Legislature did not want to have manipulated by the very lenders it sought to oversee and regulate through such laws. The holding in the Engel decision also severely limited the ability of mortgage borrowers, in lengthy and problematic foreclosure actions to assert the SOL defense, which was intended to curtail endless foreclosure efforts. The NYS Legislature also regarded the Engels decision to be abusive, in that it caused a two (2) tiered system, with mortgage lenders being given greater rights than mortgage borrowers, and greater rights than plaintiffs in other areas. Here, the mortgage lender was allowed to control its own SOL, something that was viewed as a manipulative and bypassing of the the SOL law, resulting in a disparity and abuse that was codified by the Engel decision (FN 13).

In direct reaction to the Engel decision, the NYS legislature passed the Foreclosure Abuse Prevention Act or FAPA, which signed by the Governor and became law on December 30, 2023. FAPA, per its boldly stated legislative purpose, FAPA clearly delineated in its introductory sections, that it was specifically geared to stop lenders and Courts from manipulating the six (6) year foreclosure SOL. FAPA decisively and unambiguously stated that there is no right for Lenders to de-accelerate. Since its passing some cases have closely followed FAPA’s language in giving retroactive effect to pending foreclosure actions where the law would support a finding that the SOL was violated (FN 14). However, the acceptance of FAPA has not been uniform and it has been criticized by lenders counsel as overly generous to borrowers (FN 15), and has raised questions as to whether FAPA’s retroactive effect is constitutional. (FN 16a)(FN 16b) Yet, despite the ongoing controversy, FAPA has been the controlling legislation and law, as to the SOL for foreclosures in NYS, since it was  passed.