On December 30, 2022, the New York state legislature passed the Foreclosure Abuse
Prevention Act (FAPA). The Foreclosure Abuse Prevention Act (FAPA), enacted in New
York on December 30, 2022, effectively overruled the New York Court of Appeals'
decision in Freedom Mortgage Corp. v. Engel, 37 N.Y.3d 1 (2021), concerning the
statute of limitations in mortgage foreclosure actions.
Background on Engel Decision:
In Engel, the Court of Appeals held that a lender's voluntary discontinuance of a
foreclosure action served as an affirmative act to revoke the acceleration of the
mortgage debt. This revocation reset the six-year statute of limitations period for
initiating a foreclosure action. This ruling allowed lenders to unilaterally de-accelerate
the debt by discontinuing a foreclosure action, thereby extending the time frame to
commence a new foreclosure proceeding.
FAPA's Legislative Changes:
FAPA amended several provisions of the New York Civil Practice Law and Rules
(CPLR) to counteract the Engel decision:
1. Amendment to CPLR 3217(e):
o FAPA added subdivision (e) to CPLR 3217, stating that the voluntary
discontinuance of a foreclosure action does not, in form or effect, waive,
postpone, cancel, toll, extend, revive, or reset the statute of limitations
period to commence an action and to interpose a claim, unless expressly
prescribed by statute.
2. Amendment to CPLR 203(h):
o FAPA introduced subdivision (h) to CPLR 203, specifying that once a
mortgage debt has been accelerated, any subsequent de-acceleration
must be accomplished by an affirmative act within six years of the
acceleration. Importantly, a lender's unilateral actions, such as voluntary
discontinuance, are insufficient to reset the statute of limitations.
Impact of FAPA on Engel:
By enacting these amendments, FAPA nullified the precedent set by Engel. Under
FAPA, lenders can no longer rely on the voluntary discontinuance of a foreclosure
action as a means to revoke acceleration and reset the statute of limitations. This
legislative change prevents lenders from unilaterally extending the foreclosure timeline,
thereby providing greater protection to borrowers against prolonged foreclosure
proceedings.
Case Law Reflecting FAPA's Application:
Subsequent to FAPA's enactment, New York courts have applied its provisions to
foreclosure actions:
HSBC Bank USA, N.A. v. Corrales, 210 A.D.3d 1016 (2d Dep't 2024):
o The Appellate Division, Second Department, applied FAPA retroactively,
holding that the lender's voluntary discontinuance of a prior foreclosure
action did not reset the statute of limitations. The court dismissed the
foreclosure action as time-barred, emphasizing that FAPA precludes
lenders from unilaterally extending the limitations period through
discontinuance.
These developments underscore FAPA's role in reshaping foreclosure law in New York,
ensuring that lenders adhere strictly to the statute of limitations without the ability to
reset it through unilateral actions, as was permissible under the Engel decision.
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