The Anti-Engel/Foreclosure Abuse Prevention Act (“FAPA”) was signed into law by the Governor of New York on December 30, 2022 with a retroactive clause. As you may recall, the prior Engle case decision allowed the statute of limitations clock to reset if the prior foreclosure case had voluntary discontinuance language in the dismissal of a prior foreclosure action, revoking acceleration of debt and reinstating the mortgage (also referred to as a deceleration which removes the obligation to immediately repay the total outstanding balance due on the loan). With Anti-Engle now being signed into law, there is no longer the ability to reset or extend the statute of limitations. More specifically, the Foreclosure Abuse Prevention Act puts the following into place:RPAPL § 1301 (Anti-Ramirez)
GOB §17-105(a) (Anti-Engel)
- While an action is pending, no other action shall be commenced to recover any part of the mortgage debt, without leave of Court, and provides that leave of Court in the prior action shall be a condition precedent to the filing of a new action. The purpose is to prevent simultaneous or subsequent lawsuits on both Note and Mortgage under a choice of remedies principle.
- The prohibition against filing separate suits shall not be treated as a stay for the purposes of calculating the statute of limitations.
- Commencement of any other action, while a prior action is pending shall be deemed to discontinue the prior action.
- If there is an adjudication that the debt is time-barred in one action, a separate action to collect on any portion of the mortgage debt shall also be deemed as time-barred.
CPLR § 203 (Anti-Engel)
- Provides that no express or implied promise or agreement shall reset, revive, or extend the time for commencement of an action without strict compliance with 17-105(a). The purpose is to attack the Court’s finding in Engel, that the election to accelerate a debt cannot be unilaterally revoked by the lender by virtue of a discontinuance or notice.
- Specifies that the section does not change the effect on the “accrual of a cause of action, nor the time limited for commencement of an action, based upon either”:
- A payment or partial payment made on the mortgage.
- A stipulation made in an action or proceeding.
- Compliance with 17-105(a) has been defined by Yadegar v. Deutsche Bank Nat. Trust Co., 164 A.D.3d 945 (2d Dept. 2018)(“must be signed and recognize an existing debt and must contain nothing inconsistent with an intention on the part of the debtor to pay it.”) and Batavia Townhouses, Ltd. v. Council of Churches Housing Dev. Fund Co., Inc., 189 A.D.3d 20 (4th Dept. 2020)( “the financial statements submitted by defendant [as writings acknowledging the debt”) do not meet the requirements of subdivision (1) of section 17-105 because those documents merely list the mortgage as a liability and do not constitute an express promise to pay the mortgage debt.”).
CPLR R. 3217 (Anti-Engel)
- Amends § 203 by adding a new subdivision (h) which reads that no party may unilaterally waive, toll revive or reset the accrual period for the statute of limitations.
CPLR § 205 Restricts New York’s Savings Clause by replacing “neglect to prosecute the action” with the broad term “any form of neglect”, including those specified in subdivision (c) of CPLR 3126(3)(willful failure to disclose), §3215(c) (the one year rule to file a default judgment), and §3404 (action stricken and not restored within one year) as well as failure to comply with the uniform court rules, individual part rules, scheduling orders, or failure to timely file an order or Judgment of for failure to appear at a calendar call.
- Amends CPLR R. 3217, so that a voluntary discontinuance does not act to de-accelerate the loan and eliminates a lender’s right to de-accelerate the loan unilaterally. Not even a stipulation can extend or revoke a prior acceleration according to this amendment.
CPLR § 213
- Deletes the requirement that the Court “set forth on the record the specific conduct constituting the neglect, which conduct shall demonstrate a general pattern of delay in proceeding with the litigation”.
- Further, limits lenders to a one-time application of the Savings Clause.
- Further, provides that a successor-in-interest or assignee of the foreclosing party may only utilize the “savings statute” if it “pleads and proves” that such an assignee is acting on behalf of the original plaintiff. A review of the summary in the Senate Bill reveals that this language is in fact eliminating a general successor/assignee’s ability to avail itself of the savings provision. Instead, only an entity acting on behalf of the original plaintiff from the prior action can take advantage. The example provided is a change in the trustee, but the loan stayed in the same Trust.
- Finally, it provides that any defense by a defendant timely asserted in the first action would also be considered timely in the subsequent action.
The most startling aspect of the Prevention Act is the retroactive application to all mortgage foreclosure actions in which a “final judgment of foreclosure and sale has not been enforced” (§10).When Anti-Engle conversations began a couple of years ago, ProTitleUSA wanted to be prepared in the event it was passed into law. Throughout that time, we developed a product to review the title and foreclosure case information on each foreclosure filing, followed by payment history review, as well as full servicing comments and collateral review. We also review bankruptcy files and how they correlate to the foreclosure timeline related to the Engle case.ProTitleUSA works closely with a leading NY attorney's firm to issue attorney opinions on each asset with asset risk to estimate the amount of risk and litigation required.
- Precludes a lender from asserting that a prior foreclosure action failed to accelerate the debt unless the prior action was specifically dismissed based upon a timely defense that the debt was not validly accelerated.
This review produces a 20-point check dashboard specific to NY SOL review with an option for attorney opinion that can be used for seller rebuttal, acquisition due diligence, servicer portfolio review, ongoing litigation review, servicer oversight and post acquisition risk assessment.
Even if the loans become unenforceable, we can review the severity of the issues and potentially offer to broker a sale to groups we work with that specialize in the most distressed and perilous assets.