On December 30, 2022, Governor Kathy Hochul signed into law the “Foreclosure Abuse Prevention Act” (§5473). The Foreclosure Abuse Prevention Act (“FAPA”) puts a hard six-year statute of limitations on foreclosure proceedings and controversially will take effect retroactively. FAPA applies to all pending foreclosure actions and will have a drastic impact on certain actions in danger of being time barred as a result of the six-year statute of limitations.
The Legislative intent behind FAPA was to eliminate purported abusive and unlawful litigation tactics in mortgage foreclosure actions and prevent lenders from extending the statute of limitations beyond six (6) years. As a result, the decision to accelerate a loan could have a detrimental consequence not only on lenders but on homeowners and borrowers willing to work with their lenders to get back on a performing path.
Nevertheless, the significance of FAPA should have less of an impact on future actions commenced by private bridge lenders where maturity dates are shorter term. Thus, defaults and foreclosures sought and prosecuted diligently and in the ordinary course of business by private lenders should generally be unaffected. Significantly, actions voluntarily taken by the borrower such as a waiver of the statute of limitations, a refinance and/or a loan modification as part of negotiated loss mitigation, starts the clock anew and corrects any potential infirmity. It is essential for all lenders to consider the effect of FAPA before acceleration and initiating loss mitigation.
