What You Need to Know about New York’s Foreclosure Abuse Prevention Act.

Governor Hochul signed the appropriately named Foreclosure Abuse Prevention Act (“FAPA”) on December 30, 2022. This act amends the Real Property Actions and Proceedings Law (“RPAPL”), Civil Practice Law, and Rules (“CPLR”). When signed it would render countless mortgages beyond the statute of limitations.

The bill is fairly nuanced and some cases will require more in-depth analysis for the firm to determine applicability to specific case circumstances.

Please refer to the full text of the act for additional information and any potential updates of Assembly Bill A7737B.

Freedom Mortgage Corp v. Engel

On February 18, 2021, the New York Court of Appeals reversed decades of lower court decisions and determined, among other things, that the discontinuance of a prior foreclosure case revokes a mortgage acceleration and restarts the statute of limitations. The response from banks was swift: thousands of ancient foreclosure cases breathed new life. All of that changes with the newly enacted Foreclosure Abuse Prevention Act, signed into law by the Governor on December 30, 2022: 

The law’s express intent was to overrule the Engel decision. The new law renders countless foreclosure cases dismissible as time barred. But the legislature did not stop there; they went further to reject or further clarify the legislature’s intent for every little nuanced argument the lenders have seemingly dreamed up over the years. This law will lead to a landslide of motions to dismiss by homeowners who have mortgages that are beyond the statute of limitation. The most notable changes are as follows: 

CPLR 3217 

This is the Engel killer. Under the amended CPLR 3217, no longer will a discontinuance of a foreclosure case or even a unilateral decision, like a de-acceleration letter, by itself, act to “waive, postpone, cancel, toll, extend, revive, or reset the statute of limitations period.” As the bill notes state: “A bare stipulation of discontinuance or a lender’s unilateral decision to revoke its demand for full payment is not a method prescribed by the Legislature for waiving, extending, or modifying the statute of limitations.” “[N]o party may, in form or effect, unilaterally waive, extend, reset or postpone the accrual of the statute of limitations, unless expressly prescribed by statute.”

CPLR 205

The “savings statute” of CPLR 205 no longer applies to foreclosure cases. CPLR 205 gives a plaintiff the ability to recommence an otherwise timely action within six months of final dismissal, unless the case was dismissed for reasons mentioned in the statute. This provision was used by banks to revive abandoned foreclosure cases that were otherwise beyond the statute of limitations by arguing that a judge in the prior decision did not note the “pattern of neglect” that led the dismissal in the prior action. This bizarre, judge-created rule is now gone. In fact, the new law will create a specific subsection called CPLR 205(a), which does NOT give a six month extension to refile a dismissed case if it was:

dismissed for any form of neglect include[ing], but not limited to, a dismissal made pursuant to CPLR 3126 (3), CPLR 3215 (c), CPLR 3216, CPLR 3404, violation of any court rules or individual part rules, failure to comply with any court scheduling orders, default due to nonappearance for conference or at a calendar call, or failure to timely submit any order or judgment, regardless of the specificity, or lack thereof, utilized in the dismissal order.

The notes of the bill specifically state “[t]he requirement that the judge in the prior action needing to state the “pattern of neglect” in the prior action was always a legal fiction and is gone.”

The last important change to CPLR 205 is the requirement that a plaintiff trying to take advantage of the savings statute must be the same plaintiff as in the new action. If a new lender is assigned the debt and then needs to recommence a dismissed foreclosure action, they do not get the benefit of the savings statute. That means that if a bank in the first foreclosure action assigns their debt to a new lender and the case gets dismissed, they cannot use CPLR 205 to save their case.

RPAPL 1301 

For years, lenders would recommence new foreclosure actions while a prior action remained dormant, but nonetheless, still active. Despite being in clear defiance of RPAPL 1301, which specifically prohibits two active foreclosure cases on the same debt—the case law permitted the practice because the prior actions were “defacto discontinued” or “effectively abandoned.” Under the new law, a lender cannot commence a new action while a prior action remains pending. Period. Full stop. If a lender recommences a new foreclosure, they must first seek leave of court in the prior action first. If they do not seek leave in the prior action, a Defendant in the second action will be able to file a motion to dismiss, which can be raised at any time until the bank obtains Judgment of Foreclosure and Sale. 

CPLR 213(4) 

According to existing case law, if a prior case was dismissed due to lack of standing by the bank (meaning, they commenced an action prior to be assigned the mortgage), then there was no valid acceleration and the statute of limitations did not begin to accrue. That is, because the lender did not own or control the mortgage, they could not accelerate the mortgage. Under the new law, the prior foreclosure and the acceleration in the complaint will be presumed to be valid. That is, the statute of limitations will be presumed to have started accruing from the date of the complaint, regardless of any rulings regarding a lack of standing.

The notes of the bill very clearly state: 

all acceleration events, whether occurring prior to or by way of commencement of an action, are presumptively valid, unless a prior action was dismissed upon a timely interposed defense, asserted in a defendant’s motion or application, based on an express judicial determination that no valid election to accelerate the instrument occurred prior to or by way of the commencement of that action. 

Retroactive Effect

Finally, and importantly, the Foreclosure Abuse Prevent Act takes effect immediately and applies to all foreclosure cases that have not been sold at auction. 

Interested in discussing your case, contact us.

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