The Foreclosure Abuse and Prevention Act
The Foreclosure Abuse and Prevention Act (“FAPA”) was signed into law on December 30, 2022 by Governor Kathy Hochul. FAPA was a direct response to the Court of Appeals case, Freedom Mortgage Corp. v Engel from February of 2021, which found, among other things, that a lender’s voluntary discontinuance of a foreclosure action, acted to de-accelerate the mortgage debt for statute of limitations purposes. The decision acted to create a bright-line rule, which was lauded by Plaintiffs in foreclosure actions.
Before turning to the specifics of FAPA, it is important to understand what the statute of limitations means. Statute of limitations is a prescriptive time-period by which an action must be initiated by. If a lawsuit is commenced outside of a statute of limitations period, then the borrower would have a defense to have the action dismissed and their mortgage wiped out due to the expiration of the statute of limitations. In mortgage foreclosure scenarios, the statute of limitations is a six-year period stemming from acceleration. It is important to note that acceleration is not the same as the date of default. Acceleration can happen in more than one way, however the most common way a party accomplishes acceleration is by the initiation of a foreclosure lawsuit, whereby the lender is accelerating the full amount owed on the loan, as opposed to solely the amount in default. When Engel came out, it meant that banks who had previously initiated foreclosure actions and had subsequently moved to discontinue the action had validly de-accelerated the mortgage debt. This had the legal significance of completely undoing the initial running of the statute of limitations. Therefore, it was if the statute of limitations had never started running. This decision was incredibly controversial within the foreclosure world.
New York legislators immediately took notice of Engel and responded with the introduction and ultimate passage of FAPA. FAPA not only addressed the issue of voluntary discontinuances but also made other changes across the board, to clarify the intent of the legislature, correct judicial interpretation and rectify such erroneous judicial interpretation.
RPAPL § 1301:
A lender cannot maintain more than one foreclosure action on the same mortgage debt, without leave of the court.
General Obligations Law § 17-105:
The lender cannot postpone, cancel, reset, toll, revive or otherwise extend the statute of limitations.
CPLR § 203:
A party may not unilaterally waive, postpone, cancel, toll, revive or rest the statute of limitations.
Prior to this amendment, if the statute of limitations was coming close to expiring and a lender was unable to initiate a new foreclosure action within its requisite time period, lenders had sent out “de-acceleration” letters as a means to avoid the statute of limitations. As long as there is not included language in your mortgage that would allow a lender to do so, this takes away the lender’s right to unilaterally de-accelerate a mortgage debt.
CPLR §§ 205 and 205-a:
The legislature added Section 205-a to eliminate a lender’s use of the savings clause in instances where a prior foreclosure action was dismissed for abandonment, among other things.
The savings clause would allow a plaintiff/lender to commence a new action, within six months after the termination of a prior action, upon the same transaction or occurrence or series of transactions or occurrences alleged in the previously terminated prior action, under certain conditions specified therein, provided that the new action would have been timely commenced at the time of the commencement of the prior action and that service upon defendant is effected within such six-month period. This meant for example, if a lender’s foreclosure action was dismissed for failure to prove a foreclosure notice requirement, even if the statute of limitations had technically run by the dismissal date, as long as the initial action was timely, the lender would be given an additional six months to initiate a new action (ie. savings clause).
Additionally, the legislature clarified that a party was only entitled to use the savings clause once.
CPLR § 213 (4):
In a subsequent foreclosure action, a lender is estopped from asserting that they did not have standing to bring a prior foreclosure action, unless the prior action was dismissed based on an expressed judicial determination that it did not have standing.
Prior to this amendment, lenders would attempt to avoid a statute of limitations defense in a subsequent action, by going back to a prior action and arguing it never held the note at the commencement of the action and as a result never had standing. Now, unless there was a court determination in the prior action specifically stating that the lender had failed to prove its standing, a lender in a subsequent action could never raise this argument.
CPLR R 3217:
A voluntary discontinuance shall not waive, postpone, cancel, toll, extend, revive or reset the statute of limitations.
As discussed above in regard to Engel, a lender cannot reset the clock on statute of limitations by moving to voluntary discontinue an action.
FAPA was a major win for homeowner’s across New York State, but its application have not been clear cut. It’s important that if you believe you have a statute of limitations issue that you contact an experienced attorney, who understands the intricacies of the law in order to obtain you a favorable result. At J. P. Robinson Law we offer free initial consultations and will work with you to provide zealous and knowledgeable representation. Here we are dedicated to taking the time to answer your questions and ensure you understand the process and your legal options. To get started please call J. P. Robinson Law at (914) 265-3179 or email at Justin@jprobinsonlawllc.com
Stay tuned for more FAPA updates as cases work their way through the legal process.
To review FAPA please click the link below.
S5473D (nysenate.gov)
