In the first case, Federal National Mortgage Association v. Brach, Fannie Mae was attempting to foreclose on a Brooklyn residential or commercial property connected to a mortgage from December 2002. A previous foreclosure action had been filed in September 2008, which accelerated the full home mortgage financial obligation. That action was willingly dropped in 2014. Fannie Mae then submitted a fresh case in May 2018– nearly 10 years after the clock had begun on New york city’s six-year statute of restrictions. The court stated the case came too late. Fannie Mae also argued that summary judgment was early due to the fact that discovery was still continuous. The court rejected that too, discovering that Fannie Mae stopped working to show that additional discovery might result in relevant proof.
The 2nd case, U.S. Bank v Bookspan, followed a similar arc but raised a various wrinkle. This one included a home in Flushing, Queens. An entity called Alliance Financing Company had filed a foreclosure action in April 2003, accelerating the financial obligation. That case was willingly ceased in January 2017. U.S. Bank then filed its own action in June 2017, more than fourteen years after the velocity. U.S. Bank tried a creative argument: it declared Alliance never ever had the authority to speed up the debt in the first place, meaning the clock never ever began running. The court was not encouraged.
What ties both cases together is the Foreclosure Abuse Prevention Act, or FAPA, which New york city signed into law at the end of 2022. Before FAPA, loan providers had a couple of trustworthy strategies for navigating the statute of limitations. One was to drop a foreclosure case and argue that doing so reset the clock. Another was to challenge whether the entity that originally accelerated the debt had standing to do so– and if it did not, the reasoning went, then the constraints period never began.
FAPA shut both of those doors. In the Fannie Mae case, the court validated that voluntarily stopping a previous action does not de-accelerate the financial obligation or reboot the restrictions period. In the U.S. Bank case, the court used FAPA’s estoppel rule: a lending institution can not argue that a previous acceleration was void unless the earlier case was dismissed by a judge specifically on those premises. Given that the 2003 case was voluntarily dropped, not dismissed on a judicial finding about standing, U.S. Bank had no way around it.
Both loan providers also challenged FAPA on constitutional premises. The court rejected those arguments in both cases, pointing out a growing line of appellate decisions that have currently put the question to rest.