New York Enacts Retroactive Foreclosure Legislation – Financial Services & More Trending News

While many around the globe are setting their calendars ahead
for the yr 2023, residential mortgage mortgage homeowners and servicers
might have to additionally look backward in time now that New York Governor
Kathy Hochul signed the so-known as “Foreclosure Abuse
Prevention Act” (S5473) into legislation on December 30, 2022. The new
legislation, which takes impact instantly, threatens to considerably
constrain the power of lenders, servicers and buyers to
effectively prosecute foreclosures actions and doubtlessly
jeopardizes their skill to recuperate their mortgage debt with
respect to not solely foreclosures initiated after the legislation took
impact but in addition foreclosures actions which have been pending as of
December 30.

We beforehand addressed the background and occasions
main as much as the introduction and passage of S5473 by the New York
legislature intimately. Because the laws remained unchanged
from the time the legislature handed the invoice to the time Governor
Hochul signed the measure into legislation, we don’t rehash the entire
legislation’s provisions on this Legal Update. Key provisions of the
new legislation that mortgage business members ought to concentrate on
are:

• A mortgage proprietor’s or servicer’s voluntary discontinuance
  of a foreclosures will now not re-set the six-yr statute of
  limitations to carry an motion to foreclose.¹ Under the
  new legislation, a unilateral motion by a mortgage proprietor or servicer doesn’t
  lengthen the statute of limitations for a foreclosures motion, and the
  mortgage proprietor or servicer is time-barred from foreclosing the mortgage
  after six years from the date the mortgage proprietor or servicer first
  accelerated the mortgage.² This may considerably
  constrain mortgage homeowners’ and servicers’ skill to supply loss
  mitigation choices to debtors whose loans are in
  foreclosures.




• The new legislation amends New York’s “election of
  cures” legislation to supply that when a foreclosures motion is
  barred by the statute of limitations, a mortgage proprietor or servicer is
  prohibited from bringing every other motion to recuperate the identical half
  of the mortgage debt, together with each one other foreclosures motion and
  an motion to recuperate a private judgment in opposition to the borrower on
  the promissory word.³




• Loan homeowners or servicers at the moment are prohibited from asserting, as
  protection in a quiet title motion or in response to a borrower’s
  statute of limitations protection in a foreclosures motion, that the
  statute of limitations didn’t expire as a result of the lender didn’t
  validly speed up the mortgage. Under the brand new legislation, a mortgage proprietor or
  servicer could be permitted to claim that acceleration was invalid
  provided that a previous foreclosures motion was dismissed primarily based on a court docket
  ruling that the acceleration was not legitimate.⁴




• The new legislation applies retroactively to any pending foreclosures
  motion filed earlier than December 30, 2022, for which a last judgment
  and order of sale has not been enforced.⁵

Governor Hochul signed S5473 into legislation regardless of advocacy efforts
from business teams and stakeholders. We count on stakeholders to
proceed to interact with New York legislators with the purpose of
amending the legislation through the 2023 legislative session to deal with
considerations with the brand new laws—significantly the
retroactive software of the legislation to pending foreclosures
actions—though it stays to be seen whether or not the
legislature will likely be receptive to business outreach. We additionally count on
that the retroactivity provisions contained within the new legislation will
face authorized challenges, together with constitutional claims.
Nevertheless, these authorized challenges is probably not rapidly resolved,
so business members ought to transfer expeditiously to keep up
their skill to implement New York mortgage loans in gentle of the
new legislation.

Footnotes

1. N.Y. Civ. Prac. Law & Rules §
3217(e).

2. Id. § 203(h).

3. N.Y. Real Prop. Acts. Law § 1301(4).

4. N.Y. Civ. Prac. Law & Rules §
213(4)(a)-(b).

5. 2021 New York Senate Bill No. 5473, New York Two
Hundred Forty-Fourth Legislative Session, 2021 New York Senate Bill
No. 5473.

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