In response to the New York Court of Appeals’ decision in Freedom Mortgage Corp. v. Engel (146 N.Y.S.3d 542, 2021), which held that a noteholder’s voluntary revocation of an acceleration of debt restarted the statute of limitations for mortgage foreclosure actions, the New York Legislature passed the Foreclosure Acceleration Prevention Act (FAPA) on December 30, 2022. FAPA rejected this decision and clarified that a noteholder’s voluntary discontinuance of a foreclosure action alone does not reset the six-year statute of limitations for mortgage foreclosure. This change prevents noteholders from initiating a new foreclosure action if six years have passed since the original action’s commencement, even if it was voluntarily discontinued. Borrowers can now raise the defense of the statute of limitations, leaving noteholders without recourse, especially in cases where a previous enforcement action was filed.
Furthermore, the retroactive application of FAPA, as outlined in the legislation, has raised various challenges in both federal and New York state courts over the past six months.
Based on data from Property Shark, there has been a significant 44% year-over-year increase in first-time foreclosures in New York City, totaling 427 cases during the third quarter. Brooklyn has experienced the highest surge in foreclosures, with a staggering 185% year-over-year rise. Lis pendens, indicating legal action on pending foreclosures, have increased by 35% quarter-over-quarter, with filings on the rise in four out of five boroughs. The Bronx stands out with an astonishing 1990% increase in pre-foreclosures during the same quarter.
In contrast, Manhattan and Staten Island have seen a decline in first-time foreclosures, down 23% and 36% quarter-over-quarter, respectively. Interestingly, Elmhurst in Queens has closed the third quarter as the city’s foreclosure epicenter, with 36 filings.
These trends reflect the dynamic nature of the New York City residential foreclosure market, which is influenced by various factors, including the lifting of COVID-19 moratoriums, increasing interest rates, shifting housing demand, and their collective impact on homeowners throughout the city.
Robert Aronov & Associates, PC 88-02 136th St, Jamaica, NY 11418 (718) 206-1555 https://realestatelawyernys.com/.
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