Legal Services NYC Applauds NY Court of Appeals Decisions Protecting Thousands of Homeowners from Abusive Foreclosure Filings

NEW YORK, NY – Legal Services NYC applauds two recent decisions by New York’s Court of Appeals that uphold the constitutionality and retroactive application of the Foreclosure Abuse Prevention Act of 2022 (FAPA) — a law that prevents lenders from restarting the six-year statute of limitations clock on dismissed mortgage foreclosure actions and filing endless foreclosure actions against homeowners on the same debt. These decisions, which make clear that FAPA applies retroactively and is constitutional, will protect thousands of struggling homeowners across New York State. Legal Services NYC served as counsel to 20 legal services organizations from across New York in filing an amicus brief in the case.

“These decisions are a huge win for New York homeowners who, for too long, have been preyed upon by lenders seeking to manipulate the statute of limitations and relitigate foreclosure actions that have long been dismissed or abandoned,” said Jacob Inwald, Director of Litigation-Economic Justice at Legal Services NYC. “Governor Hochul and state legislators wisely closed the loophole that allowed lenders to refile time-barred foreclosure actions by passing the Foreclosure Abuse Prevention Act and the Court of Appeals correctly reinforced the law’s protections. Struggling New York homeowners can breathe a little easier knowing their rights against time-barred foreclosure actions are being upheld.” 

Following the mortgage crisis of 2008, lenders filed tens of thousands of foreclosure actions against defaulted homeowners, accelerating the amount owed but often with little to no evidence that they actually owned the loans. In response, New York State implemented a series of protections to ensure that the lenders filing these actions were actually entitled to foreclose and to ensure that homeowners received proper notice of pending cases. 

Lenders then abandoned their cases by the thousands, unable to provide evidence and frequently allowing the six-year statute of limitations to expire. 

However, despite abandoning these initial cases, lenders did not stop filing subsequent cases, arguing that previous attempts did not actually trigger the statute of limitations because plaintiffs were not the proper parties to pursue foreclosure and did not have the authority to accelerate the loan. 

New York passed the Foreclosure Abuse Prevention Act of 2022 specifically to stop lenders from pursuing time-barred foreclosure actions, preventing them from restarting the statute of limitations clock on loans that were previously accelerated even if lenders voluntarily withdrew or discontinued the case. 

In its decision, New York’s Court of Appeals rightfully found that New York’s Legislature intended FAPA to apply retroactively since the law clearly states that protections “shall take effect immediately and shall apply to all [foreclosure] actions in which a final judgment of foreclosure and sale has not been enforced.” The Court also found that it is entirely constitutional to apply FAPA retroactively because the banks in these cases waited far beyond the six-year limitations period and had control over the prior actions.

“These decisions affirm that the nation’s largest financial institutions don’t get special exceptions from the same statutes of limitations that apply to all other civil litigants,” said Christopher Newton, Director of Litigation in Legal Services NYC’s Queens office. “I’m thankful to our amicus partners who helped us to highlight the real cost to homeowners throughout the state when these cases linger for years and hope this leads to closure for many of our clients who still have ongoing cases that these decisions can help resolve.”

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Legal Services NYC fights poverty and seeks racial, social, and economic justice for low-income New Yorkers. For over 50 years, LSNYC has challenged systemic injustices that trap people in poverty and helped clients meet basic needs for housing, income and economic security, family and immigration stability, education, and health care. Our staff of dedicated advocates have deep roots in the communities we serve so New Yorkers and their families can access the services, resources, and protections they need to survive. www.legalservicesnyc.org