How New York Homeowners Are Scoring Free Houses During Foreclosure Using New York’s Statute Of Limitations Law
MFI-Miami and our partner law firms used to use a similar tactic in Florida. That was until the Florida Supreme Court stepped in with the Bartram decision. Now we can only argue standing and the validity of the debt.
The good news is that the New York State Courts are allowing homeowners to invoke the statute of limitations. Yes, this is a game changer for New York homeowners.
New York homeowners facing foreclosure are beginning to invoke New York’s six-year statute of limitations law.
The NYS statute of limitations begins when the homeowner receives the original notice of acceleration from their lender. The courts have ruled a lender must also send out a de-acceleration in order to initiate a second foreclosure action.
How New York Homeowners Benefit From The New York Statute Of Limitations Law
As more and more foreclosure actions from the great recession continue to age, the statute of limitations defense under CPLR §213(4) has taken center stage as one of the more common and powerful defenses available to homeowners in New York.
As a result, foreclosure mill lawyers have made a plethora of arguments sowing confusion with how the statute of limitations is calculated. Thus, complicating this popular defense.
They have successfully argued that the lack of clarity in the mortgage documents and actions of the homeowner affect the limitation dates.
The Second Department Of the NYS Appellate Division has handed down two decisions designed to help alleviate at least a part of the confusion. The decisions revolve around de-acceleration.
Lenders Must Accelerate A Loan Against New York Homeowners In Order To Foreclose
First, a lender must accelerate the loan under the terms of the mortgage in order to foreclose. The borrowers’ right and obligation to make monthly installments cease and all sums become immediately due and payable. Thus, the six-year Statute of Limitations begins on the entire mortgage debt.
A lender seeking to accelerate the debt must satisfy certain elements in order to accelerate the debt.
To accelerate a loan a lender must provide the mortgagor with notice of the acceleration and their options to cure the default. The notice must be clear and concise. It must include the amount of arrearage and amount to bring the loan current. It also must accurate.
Lenders Must De-Accelerate The Loan If They Lose Or Withdraw The Foreclosure
In most foreclosure cases it is assumed that the lender will win. However, that is not always the case. Especially in cases that have dragged out because of New York’s notorious litigation times or because of mortgage servicing backlog.
When a lender loses or withdraws a foreclosure claim they have to rescind their claim of acceleration. In other words, they have to de-accelerate the loan. They also must rescind the lis pendens and the foreclosure complaint. These are important steps if the lender wants to refile the foreclosure action and have a second bite at the foreclosure apple.
Most mortgage servicers are eager to get a loan performing again. Usually, after losing a foreclosure case, they will offer the homeowner kick ass terms on a loan modification. Especially in places like New York where foreclosure litigation average 4 years and could drag out for as long as 10 years.
However, some mortgage servicers are eager to ignite a new fight. Their eagerness is usually their undoing. They will issue a new letter of acceleration. However, they can only collect on anything owed in the past six years. They also usually forget to issue a De-Acceleration letter from the previous foreclosure. They issue a new acceleration letter thinking no one will notice that they conveniently forgot the De-Acceleration letter.
New York Homeowners: Know Your Rights Or Lose Your Home!
Foreclosure mill lawyers will ignore the previous foreclosure case if they file a new one. This is where New York homeowners can score a free house.
The original acceleration letter stays in effect until the homeowner receives a De-Acceleration letter regardless if a new acceleration letter is mailed out. Thus, the 6-year statute of limitations clock will continue ticking from the date on the original acceleration letter, not the new acceleration letter.
Therefore, if the original letter of acceleration is older than 6 years from the date the lender initiates the second foreclosure action, the lender is out of luck making a legal claim.