New York court makes it harder for lenders to restart foreclosure clock

A key issue arose: Azcuy and Cohen argued that the six-year statute of limitations for foreclosure actions had expired, since the mortgage was accelerated in 2012. They also filed a counterclaim under New York’s Real Property Actions and Proceedings Law (RPAPL) 1501(4) to cancel and discharge the mortgage. GITSIT Solutions, LLC countered that the discontinuance of the 2012 action should have revoked the acceleration, resetting the limitations period. GITSIT also argued that the statute of limitations should run from the 2016 action and that the Foreclosure Abuse Prevention Act (FAPA), enacted in late 2022, should not apply retroactively. 

The Supreme Court, Rockland County, granted summary judgment to Azcuy and Cohen, dismissing GITSIT’s foreclosure complaint as time-barred and granting default judgment on the counterclaim to cancel the mortgage. The court also denied GITSIT’s motion to extend its time to reply to the counterclaim and to amend its complaint to add new causes of action for equitable subrogation and unjust enrichment. GITSIT appealed. 

On appeal, the Appellate Division affirmed the lower court’s decision. The appellate court explained that a foreclosure action is governed by a six-year statute of limitations in New York. Once a mortgage debt is accelerated, the entire amount becomes due and the statute of limitations begins to run. The court noted that, prior to FAPA, voluntarily discontinuing a foreclosure action could revoke acceleration and reset the limitations period. However, FAPA amended the law to state that discontinuing a foreclosure action does not reset or extend the statute of limitations unless specifically allowed by statute. 

Applying FAPA, the court found that the discontinuance of the 2012 action did not reset the statute of limitations. Since the mortgage was accelerated in 2012 and the new foreclosure action was not commenced until 2022, more than six years had passed, making the action time-barred. The court also upheld the denial of GITSIT’s motion to amend its complaint, finding the proposed new causes of action were either time-barred or insufficient. Additionally, the court found that GITSIT did not provide a reasonable excuse for its default in replying to the counterclaim. 

For mortgage professionals, this case highlights the importance of tracking foreclosure timelines and understanding the impact of legislative changes like FAPA. The decision clarifies that lenders and servicers cannot rely on discontinuing and refiling foreclosure actions to reset the statute of limitations. Once a mortgage is accelerated, any foreclosure action must be commenced within six years, regardless of whether earlier actions are discontinued.