New York Courts Split On The Constitutionality Of The Foreclosure Abuse Prevention Act

• Published date: 11 July 2023
• Subject Matter: Finance and Banking, Litigation, Mediation & Arbitration, Charges, Mortgages, Indemnities, Trials & Appeals & Compensation
• Law Firm: Goodwin Procter LLP
• Author: Christian Fletcher

In the six months since New York's governor signed the Foreclosure Abuse Prevention Act, L. 2022, ch. 821 (eff. Dec. 30, 2022) (FAPA), a split has emerged about whether the law applies retroactively.

FAPA strictly cabins the time limits for commencing mortgage foreclosures by amending five New York procedural rules (CPLR 203; CPLR 205; CPLR 213; CPLR 3217; RPAPL 1301) and the state's General Obligations Law (GOL 17-105). The intent of the act, according to its sponsor, was to overturn certain precedent interpreting those rules and laws. Most significantly, FAPA invalidates the holding of Freedom Mortgage v. Engel, 37 N.Y.3d 1 (Feb. 18, 2021). In that case, New York's highest court concluded that a mortgage holder may revoke a prior election to accelerate an installment debt (acceleration is generally a precursor to foreclosure), thereby preserving the option to accelerate again in the future. By undoing Engel, and other precedent too, FAPA takes away this and similar options from foreclosing plaintiffs.

Recent court decisions applying FAPA have varied as to whether or not the act's effects may, constitutionally, be retroactive.

Two federal court decisions have found that it may. One found FAPA applied retroactively such that the mortgage owner's discontinuance of a prior foreclosure action, which under Engel would have functioned to revoke acceleration of the mortgage loan, no longer had that effect. East Fork Funding LLC v. U.S. Bank N.A., 2023 WL 2660645 (E.D.N.Y. Mar. 23, 2023) (canceling mortgage as time-barred). Another applied the FAPA-amended CPLR 205. Windward Bora, LLC v. Sotomayor, 2023 WL 2575582 (S.D.N.Y. Mar. 20, 2023). Appeals have been filed in both cases.

In New York state court, the decisions are split.

Five New York trial courts have declined to apply FAPA retroactively. HSBC Bank USA, N.A. v. Besharat, Index No. 500836/2021 (N.Y. Sup. Ct. Putnam Cnty May 19, 2023); Wilmington Savings Bank v. Hack, Index No 701590/2019 (N.Y. Sup. Ct. Queens Cnty Apr. 21, 2023); Deutsche Bank Nat'l Tr. Co. v. Feurtado, Index No. 719810/2019 (N.Y. Sup. Ct. Queens Cnty Mar. 29, 2023); NewRez LLC v. Kalina, (N.Y. Sup. Ct. Albany Cnty Mar. 22, 2023); MTGLQ Invs., L.P. v. Gross, (N.Y. Sup. Ct. Westchester Cnty Mar. 16, 2023); see also Nestor I LLC v. Moriarty-Gentile, Index No. 065328/2014 (N.Y. Sup. Ct. Suffolk Cnty May 2, 2023) (in dicta, noting FAPA should not apply retroactively).

Seven others have found the act does apply retroactively. U.S. Bank Tr.,...