New York Law Journal: Can the Foreclosure Abuse Prevention Act Survive a Constitutional Challenge?

New York Law Journal, January 6, 2023 

Diana M. Eng and Andrea M. Roberts

In February 2021, the New York Court of Appeals issued a long-awaited decision in Freedom Mortgage v. Engel, 37 N.Y.3d 1 (2021), which, among other things, held that the voluntary discontinuance of a foreclosure action constitutes an affirmative revocation of acceleration because such “discontinuance withdraws the complaint and, when the complaint is the only expression of demand for immediate payment of the entire debt, this is the functional equivalent of a statement by the lender that the acceleration is being revoked.” Id. at 31-32. This decision was reasoned upon longstanding case law governing contract interpretation. See Albertina Realty Co. v. Rosbro Realty, 258 N.Y. 472 (1932); Kilpatrick v. Germania Life Ins. Co., 183 N.Y. 163 (1905).

Engel was seen as a win for the financial services industry after years of the appellate courts and New York State Legislature imposing obstacles that delayed foreclosures or prevented lenders from foreclosing upon defaulted residential mortgage loans. Foreclosure defense attorneys and pro bono legal services labelled Engel “egregious” because they viewed it as a license for banks to bring previously time-barred cases “back to life.” See Maria Volkova, ‘Foreclosure Abuse Prevention Act’ awaits New York governor’s signature, HousingWire (May 13, 2022). As a result, the New York State Legislature drafted the “Foreclosure Abuse Prevention Act” (Act), which amends CPLR 3217 by adding a new subdivision (e) to provide that the voluntary discontinuance of an action, whether by motion, order, stipulation or notice, shall not waive, postpone, cancel, toll, extend, revive or reset the statute of limitations, unless prescribed by statute. NY State Assembly Bill A7737BNY State Senate Bill S5473D. The Act became effective immediately upon Governor Hochul’s execution on Dec. 30, 2022 and applies to all actions commenced under CPLR 213(4) and in which a final judgment of foreclosure and sale has not been enforced. A.B. A7737B, §10. As such, the Act retroactively applies to pending actions, not just actions commenced after the effective date.

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