A foreclosure in New York begins when the lender files a lawsuit asking a court for an order allowing a foreclosure sale. Under New York law, the statute of limitations for starting a foreclosure after debt acceleration is six years.
Previously, the Court of Appeals ruled on four New York foreclosure cases and said that if the lender voluntarily discontinues the case, the withdrawal revokes the acceleration. (Freedom Mortgage Corp. v. Engel, 37 N.E.3d 1 (Feb.18, 2021)). So, when a lender ended a foreclosure suit, even if they never notified the borrower, it stopped the statute-of-limitations clock automatically. The lender simply accelerates the loan again later, starting a new six-year period.
For example, say your lender accelerated your mortgage loan in 2009 and started a foreclosure action, which it voluntarily discontinued in 2014. The lender accelerated the loan for a second time and initiated another foreclosure action in 2016. You might think that the six-year statute of limitations continued to run from the date of the initial acceleration in 2009, and the lender's second foreclosure suit in 2016 should be time-barred because more than six years went by. Under Engel, however, the lender's voluntary discontinuance of the first foreclosure suit constituted a revocation of acceleration. So, the statute of limitations was reset.
In Engel, because a lender's dismissal of a foreclosure action revoked the earlier acceleration, the court held that the lender need only bring the current foreclosure suit within six years of any subsequent acceleration. (The Engel decision overturned lower courts' readings of New York law that said if lenders don't start legal proceedings within six years of first moving to foreclose, or let borrowers know if they decide to stop pursuing foreclosure, the foreclosure suit becomes invalid.)
However, New York's recently-passed "Foreclosure Abuse Prevention Act" (S5473D) overrules the Engel decision. Under S5473D, a lender's unilateral action doesn't extend the statute of limitations for a foreclosure action, and the lender is time-barred from foreclosing a mortgage after six years from the date the loan was first accelerated. So, if the lender voluntarily discontinues a foreclosure action, the six-year statute of limitations period keeps running. Going back to the earlier example, the second foreclosure action would now be time-barred under S5473D.
This new law applies retroactively to any pending foreclosure action filed before December 30, 2022, for which a final judgment and order of sale hasn't been enforced. If you're facing a foreclosure in New York and think the statute of limitations has expired, talk to a foreclosure attorney immediately. You might have a defense to a foreclosure action.
Effective date: December 20, 2022