On December 30, 2022, New York Gov. Kathy Hochul signed into law the Foreclosure Abuse Prevention Act (the “Act”), which will hinder lenders and servicers’ ability to foreclose on New York homeowners. The Act makes the six-year statute of limitation to foreclosure a hard-and-fast rule with exceptionally little workaround. Lenders will now, in some cases, have significant difficulty foreclosing on repeat offenders. The Act’s amendments to the law take effect immediately and apply not only to new foreclosure actions but also to all pending cases in process where a final judgment of foreclosure and sale has not been enforced.
The Act amends the Real Property Actions and Proceedings Law (RPAPL § 1301), the General Obligations Law (NY Gen Oblig § 17-105), and the Civil Practice Law and Rules (NY CPLR §§ 203, 205, 213, and 3217) in relation to the rights of parties involved in foreclosure actions.
Specifically, CPLR Section 3217 is amended to provide that a voluntary discontinuance of a mortgage foreclosure action does not reset the statute of limitations. Further, CPLR Section 203 is amended by adding a new subdivision “h,” which provides no party may unilaterally stop the running of the statute of limitations. These two amendments overrule the Court of Appeals decision in Freedom Mortgage Corp. v. Engel, 37 N.Y.3d 1 (2021), which held that, where the statute of limitations began to run upon the commencement of a foreclosure action, a voluntary discontinuance of that action constitutes a revocation of the election to accelerate, stopping the running of the statute of limitations.
Subdivisions 4 and 5 of General Obligations Law Section 17-105 are amended to provide that an acknowledgment, waiver, promise or agreement, express or implied in fact or in law, shall not postpone, cancel, reset, toll, revive or otherwise extend the statute of limitations to foreclose a mortgage for any greater time or in any other manner than that provided in this section. This amendment does not change the requirements or the effect with respect to the accrual of a cause of action, nor the time limited for the commencement of an action based upon either a payment or part payment, or the principal or interest, or a stipulation made in an action or proceeding.
RPAPL Section 1301 amends New York’s “election of remedies” law by providing that once a foreclosure action is adjudicated to be beyond the six-year limitations period, the lender is prohibited from filing a new action on the same debt (including a new action to sue on the promissory note).
CPLR Section 213 is amended to prohibit mortgage lenders from asserting, either in defense of an action to cancel a mortgage or in response to a statute of limitations defense asserted by a borrower, that the statute of limitations did not expire because the lender did not validly accelerate the loan. Stated another way, a lender cannot assert the argument that a prior action did not result in acceleration of the debt. The only exception is where the prior action was dismissed by the court on the grounds that the underlying note was not validly accelerated.
CPLR Section 205 is amended by adding CPLR Section 205-a, which creates a new “savings” statute which permits a new foreclosure action to be commenced where a prior action for the same relief was timely filed but later dismissed for any reason other than: (1) by voluntary discontinuance; (2) failure to obtain personal jurisdiction over the defendant; (3) dismissal for neglect to prosecute; or (4) dismissal on the merits, so long as the new action is also timely under the statute of limitations. Notably, this amendment limits a mortgage lender’s use of the saving statute to one time only.
