Impacts of the Foreclosure Abuse Prevention Act

On December 30, 2022, Governor Kathy Hochul signed the Foreclosure Abuse Prevention Act (“FAPA”) (A7737B) into law. Originally introduced by Senator James Sanders, Jr. on March 8, 2021, FAPA spent nearly two years moving through New York’s legislative process. The law 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 are now time-barred under New York’s six-year statute of limitations for mortgage foreclosures. This article explores the current state of New York foreclosure law and how FAPA has reshaped the legal landscape.

I. Understanding the Statute of Limitations

A statute of limitations sets 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, creating confusion about how the statute applies.

The statute of limitations affects mortgage foreclosures in two key ways:

• Installment Contracts: A mortgage is an installment contract, where each missed payment constitutes a separate breach. For example, if a borrower misses a payment on January 1, 2010, the lender has until January 1, 2016, to file a foreclosure action based on that missed payment.
• Acceleration of Debt: Mortgage agreements often allow lenders to accelerate the loan upon default, making the full loan balance immediately due. If the lender doesn’t file a foreclosure action within six years of acceleration, the mortgage debt becomes time-barred.

II. How Lenders Accelerate Mortgage Debt

A significant legal issue in foreclosure cases is whether and how a lender accelerates a loan. Acceleration can happen through:

• Filing a Foreclosure Complaint: Under both Engel and FAPA, filing a foreclosure lawsuit seeking full repayment of the loan is sufficient to accelerate the debt.
• Notifying the Borrower: A lender may also accelerate by sending notice to the borrower, but simply stating an intention to accelerate in the future is not enough.

Because many loans have prior foreclosure actions from the 2007–2010 subprime mortgage crisis, it’s likely that a prior complaint accelerated the loan, 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 resetting the statute of limitations and enabling a new foreclosure action at any time.

FAPA removes 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 the 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 limits this statute further by allowing only the original plaintiff to refile, which poses a challenge when loans are 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 clarify the issue, it is likely to 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 offers legal guidance to lenders, junior lien holders, and borrowers. Contact us today to discuss how FAPA impacts your foreclosure rights and obligations.