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The Appellate Division, Third Department, Holds that Retroactive Application of the Foreclosure Abuse Prevention Act (“FAPA”) Does Not Violate Due Process

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  • Posted on: Oct 25 2024

By: Jonathan H. Freiberger

As readers of this BLOG know, we frequently write about issues relating to mortgage foreclosure.[1] We have also written numerous articles relating to the recently enacted FAPA. See, e.g., [here], [here], [here] and [here]. Today’s BLOG article relates to U.S. Bank National Association v. Lynch, a case decided by the Appellate Division, Third Department, on October 24, 2024, and in which it determined that the retroactive application of FAPA does not violate a lender’s due process rights.[2]

In 2006, the defendant borrower in Lynch borrowed money from the lender and secured her repayment obligations with a mortgage on real property. The lender commenced a foreclosure action in 2008 after an alleged default by the borrower. The lender’s summary judgment motion was granted in 2011, but the case was “marked off” the calendar as inactive after the lender failed to file an order granting the motion.

A second foreclosure was commenced by the lender in 2015. The Borrower defaulted in appearing. In 2017, a judgment of foreclosure and sale was issued in 2017. In 2019, before the lender took steps to enforce the judgment of foreclosure and sale, the borrower moved to vacate her default. The motion court granted the motion. Thereafter, the lender moved for summary judgment and the borrower cross-moved for summary judgment, arguing that the lender’s second action was time-barred. Finding that the lender accelerated the loan in 2008 when it commenced the first action and failed to subsequently de-accelerate, the motion court held that the second action was time-barred. [3]

In 2022, the lender moved to restore the first action to the calendar, which motion was granted over the borrower’s opposition. The motion court specifically rejected the borrower’s argument that FAPA mandated the dismissal of the first action as time-barred. The borrower appealed.

The borrower argued to the Third Department that the motion court erred in failing to apply FAPA. Conversely, the lender argued that retroactive application of FAPA would violate its due process rights. Among other things, FAPA amended RPAPL 1301 to add subparagraph 4, which provides that “[i]f an action to foreclose a mortgage or recover any part of the mortgage debt is adjudicated to be barred by the applicable statute of limitations, any other action seeking to foreclose the mortgage or recover any part of the same mortgage debt shall also be barred by the statute of limitations.” The Court then noted that while legislative amendments should generally be applied prospectively, “remedial legislation should be given retroactive effect in order to effectuate its beneficial purpose.” (Citations and internal quotation marks omitted.) In this regard, the Court stated that:

However, classifying a statute as ‘remedial’ does not automatically overcome the strong presumption of prospectivity. Rather, in determining whether a legislative amendment should be given retroactive effect, courts must consider whether the Legislature has made a specific pronouncement about retroactive effect or conveyed a sense of urgency; whether the statute was designed to rewrite an unintended judicial interpretation; and whether the enactment itself reaffirms a legislative judgment about what the law in question should be. The Legislature enacted FAPA to clarify existing law to ensure that statutes of limitations provide finality. In exercising its legislative judgment, the Legislature set forth the process available to noteholders to foreclose a mortgage, including the manner in which the statute of limitations may be tolled or restarted, while also ensuring that homeowners are not overburdened by having to defend multiple actions ad infinitum. Further, the Legislature clearly set forth that FAPA “shall take effect immediately and shall apply to all actions commenced on an instrument described under [CPLR 213 (4)] in which a final judgment of foreclosure and sale has not been enforced” For the foregoing reasons, we find that FAPA should be applied retroactively to effect its beneficial purpose. [(Citations, internal quotation marks and brackets omitted.)]

The Court went on to discuss that, in light of the Court of Appeals’ decision in in Freedom Mtge. Corp. v Engel, 37 N.Y.3d 1 (2021), there was an “urgent need to correct judicial interpretation with unintended consequences which allowed noteholders to unilaterally ‘manipulate statutes of limitations to their advantage’ and to the detriment of homeowners.” (Citation omitted.)[4]

In rejecting the lender’s position that its due process rights would be violated if FAPA was applied retroactively, the Court explained:

Next, we turn to plaintiff’s contention that a retroactive application of FAPA would violate its due process right to recover on the mortgage debt. To comport with the requirements of due process, retroactive application of a newly enacted provision must be supported by a legitimate legislative purpose furthered by rational means. This standard is not exacting, and the challenged legislation will survive so long as it is rationally related to any conceivable legitimate State purpose. Here, the Legislature rejected case law that would allow noteholders to abuse the foreclosure process by manipulating and extending the statute of limitations to the detriment of homeowners and it acted to overrule such case law. To prevent unintended results, the Legislature enacted FAPA to clarify the judicial process through which noteholders could recover on a mortgage debt, while also protecting homeowners from having to defend multiple foreclosure actions for lengths of time that far exceed the applicable statutes of limitations. As such clarifications are rationally related to the legitimate legislative purpose of providing a mechanism for parties to resolve their disputes with finality, we find that retroactive application of FAPA to foreclosure actions where a final judgment has not been enforced does not violate plaintiff’s due process rights. [Citations, internal quotation marks and footnote omitted; emphasis in original.)]

Ultimately, the Court found that the loan was accelerated by the lender when it commenced the first foreclosure action and that it was not de-accelerated. Therefore, the six-year statute of limitations on the accelerated loan expired prior to the commencement of the second foreclosure action. Additionally, because the first and second foreclosure actions both “sought ‘to foreclose the same mortgage debt,’ such adjudication also renders the 2008 action ‘barred by the statute of limitations’” (RPAPL 1301 [4]). (Some citations and internal ellipses omitted.) Accordingly, the Court held that the motion court “should have denied plaintiff’s motion to restore the 2008 action to the calendar”.

Jonathan H. Freiberger is a partner and co-founder of Freiberger Haber LLP.

This article is for informational purposes and is not intended to be and should not be taken as legal advice.


[1] Eds. Note: this BLOG has written numerous articles addressing all aspects of residential mortgage foreclosure. To find BLOG articles related to mortgage foreclosure, visit the “Blog” tile on our website and enter “foreclosure” (or any related topic of interest) in the “search” box.

[2] Eds. Note: On December 19, 2023, the Appellate Division, First Department, in Genovese v. Nationstar Mortgage LLC, 223 A.D.3d 37 (2023), held that FAPA is to be applied retroactively. However, the First Department could not consider the lender’s “constitutional challenges to the retroactive application of FAPA under the Contract and Due Process Clauses of the Federal Constitution because, as plaintiff notes in her reply brief, defendant has not notified the Attorney General of those challenges (see CPLR 1012 [b]).” Genovese, 223 A.D.3d at 45. This Blog wrote about Genovese [here].

[3] Eds. Note: this BLOG has written numerous articles addressing issues in foreclosure actions related to the interrelationship between the statute of limitations, acceleration and de-acceleration. To find BLOG articles related to these issues, visit the “Blog” tile on our website and enter “statute of limitations,” “acceleration” and/or “de-acceleration” in the “search” box.

[4] This BLOG has previously written about Engel. See, e.g., [here] and [here].

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