NY State Senate Pending Legislation S5473D

New York State Senate Responds to Freedom Mortgage Corp. v. Engel with Pending Legislation S5473D
By Joseph G. Devine, Jr., Managing Attorney, Tromberg, Morris & Poulin, PLLC
On February 18, 2021, the New York Court of Appeals decided in Freedom Mortgage Corp. v. Engel, 169 N.E.3d 912, 37 N.Y.3d 1 (2021) that a de-acceleration occurs when either a foreclosure action is dismissed by the court, or a foreclosure action is voluntarily discontinued by the Plaintiff.  In essence, the effect was that the 6 year statute of limitations in a foreclosure action de-accrued upon these de-accelerations, and a new foreclosure action would be considered timely under the statute of limitations, except for time-barred debt.  Plaintiffs and servicers subsequently filed motions to restore actions that were dismissed as a result of the statute of limitations.
On March 8, 2021, in response to the Engel, the New York State Senate introduced legislation titled the “Foreclosure Abuse Prevention Act.”  The current, and most likely to pass amended bill was drafted on March 8, 2022, passed the Judiciary Committee in a 10-3 partisan vote on March 14, 2022, and titled as Senate Bill S5473D.  The bill passed both houses of the legislature, and is being delivered to Gov. Kathy Hochul.
The main intent of the legislature is to overrule Engel, specifically stating that Engel “effectively put the ability to unilaterally manipulate, arrest, stop, and restart the limitations period prescribed CPLR 213 (4), at will, directly in the hands of mortgage foreclosure plaintiffs and their servicers, to the clear detriment of New York homeowners.  No other civil plaintiff in this state is extended such unilateral and unfettered powers.  As a direct result of Engel, trial and appellate courts throughout the State have been bombarded with a flurry of motions made by mortgage lenders and servicers to re-open cases, some having been dismissed years ago on statute of limitations grounds, on the basis that Engel represents a change or clarification in the decisional law that, in effect, not only exempts mortgage foreclosure plaintiffs from having the statute of limitation applied to them, but gives them unilateral and unbridled control to manipulate calculation of the six year period provided under CPLR 213(4)…”  (see Justification section).
The proposed statute, in practice, would make it such that the statute of limitations would accrue at the initial acceleration of the debt (namely filing of the original complaint).  However, de-acceleration will not be considered a de-accrual of said statute of limitations, unless the loan was not properly accelerated (this must be determined by the court.  Specific language in the bill includes, under §8(b), “Effect of discontinuance upon certain instruments.  In any action on an instrument described under subdivision four of section two hundred thirteen of this chapter, the voluntary discontinuance of such action, whether on motion, order, stipulation or by notice, shall not, in form or effect, waive, postpone, cancel, toll, extend, revive or reset the limitations period to commence an action and to interpose a claim, unless expressly prescribed by statute.”  Additionally, the bill addresses court-imposed dismissals, stating in § 6, that if an action is timely commenced and is terminated “in any manner other than a voluntary discontinuance, a failure to obtain personal jurisdiction over the defendant, a dismissal of the complaint for any form of neglect, including, but not limited to those specified in (the CPLR) for violation of any court rules or individual part rules, for failure to comply with any court scheduling orders, or by default due to nonappearance for conference or at a calendar call, or by failure to timely submit any order or judgment, or upon a final judgment upon the merits, the original plaintiff…may commence a new action upon the same transaction or occurrence or series of transactions or occurrences within six months following the termination, provided that the new action would have been timely commenced within the applicable limitations period prescribed by law at the time of the commencement of the prior action…”
Gov. Hochul has indicated that she intends to sign this iteration of the Foreclosure Abuse and Prevention Act.  Servicers should watch this legislation closely, as it places limits on the findings regarding the statute of limitations in Engel.