Foreclosures, Your Options And The New Laws Passed In New York
There are two new items I wanted to share with you this month, in regards to foreclosures.
Foreclosure Abuse Prevention Act
On December 30, 2022, New York State Governor Hochul signed the Foreclosure Abuse Prevention Act (FAPA.) The Act amends the Real Property Actions and Proceedings Law (RPAPL), General Obligations Law (GOL) and Civil Practice Law and Rules (CPLR) and became effective immediately, which means it pertains to both pending and new foreclosure actions. It is designed to prevent manipulative foreclosure practices.
So, what does this mean?
FAPA now no longer allows a loan owner’s or servicer’s voluntary discontinuance of a foreclosure to reset the six-year statute of limitations to bring an action to foreclose. Under the new law, a unilateral action by a loan owner or servicer does not extend the statute of limitations for a foreclosure action, and the loan owner or servicer is time-barred from foreclosing the mortgage after six years from the date the loan owner or servicer first accelerated the loan. This could significantly constrain loan owners’ and servicers’ ability to offer loss mitigation options to borrowers whose loans are in foreclosure.
The new law also amends New York’s “election of remedies” law to provide that once a foreclosure action is barred by the statute of limitations, a loan owner or servicer cannot bring any other action to recover the same part of the mortgage debt, including both another foreclosure action and an action to recover a personal judgment against the borrower on the promissory note.
A loan owner or servicer is only permitted to assert that acceleration was invalid if a prior foreclosure action was dismissed based on a court ruling that the acceleration was invalid.
Finally, the new law applies retroactively to any pending foreclosure action filed before December 30, 2022, for which a final judgment and order of sale has not been enforced.
This new law will especially help those who have been dealing with foreclosure actions for an extended period of time.
Separate Envelope Requirement
Two cases came down in 2021 which strictly construed RPAPL 1304 as requiring notices to be sent in separate envelopes. In Wells Fargo N.A. v. Yapkowicz, the Appellate Division, Second Department, dismissed a lender’s foreclosure action and held that a joint notice in one envelope addressed to two borrowers residing at the same address did not satisfy the requirements of 1304. We are now actively watching a case before the Court of Appeals that may further affect how notices are sent to homeowners. In Bank of America N.A. v. Kessler, the Appellate Division, Second Department stated that proper notices must be sent to homeowners facing foreclosure and arrive in separate envelopes, as per statute. In Kessler, the Court held that “inclusion of any material in the separate envelope sent to the borrower under RPAPL 1304 that is not expressly delineated in these provisions constitutes a violation of the separate envelope require of RPAPL 1304(2).” Bank of America has appealed this decision.
So, what does this mean if you are facing foreclosure? Keep your envelopes and all the notices that were sent to you. If the notices were not received in the manner prescribed by the law, this is a defense to the foreclosure action. It is important to have an attorney representing you from the beginning so you can preserve all rights and defenses you are allowed under the law.
Foreclosure is not a quick process and there are options. If you are facing foreclosure, give us a call. We can discuss foreclosure defense, mortgage modifications, short sales or a deed in lieu of a foreclosure option. While you may not be able to save your home, you could exit the residence more on your terms.