The New York State Court of Appeals on Thursday released a ruling impacting several cases related to limitation periods (SOL) for foreclosures in the Empire State. The Court of Appeal ruled on the case Freedom Mortgage Corp. vs. Engel, which focused on whether lenders who choose to step up foreclosure can then voluntarily halt that action later and, if so, how that affects the SOL timeline.

You can read the full court opinion by clicking here.

DS News spoke with Rich Haber, Managing Partner, New York and New Jersey, McCalla Raymer Leibert Pierce, to find out why this case is important and what it means for the industry in the future.

Could you give us an overview of why this matter is important?

The statute of limitations has long been a challenge for agents trying to foreclose in New York. The statute of limitations begins when the loan is accelerated, and this usually happens when the foreclosure complaint is filed. What this ruling says now is that if you willfully reject your case, it slows down the loan and revokes the acceleration.

The reason this is important is that duty officers have many cases that are second or third filings, with previous complaints having been filed several years ago. The bar has continually maintained that the statute of limitations began when the first complaint was filed and continued to run without interruption, meaning that if the current case was filed more than six years after the first case, it is prescribed and the agent can ‘t exclude.

What that says is, no, you get a stay, you can start over. If you willfully dismiss the case, it stops the acceleration and revokes it, and you can then bring another foreclosure action later. So what this now brings into play is a whole population of loans for which agents were faced with a potential limitation period and a complete loss of lien. They now have a path to foreclosure based on this decision.

This will likely create a new round of litigation in lower courts, as lawyers for the borrowers will seek to limit this decision in any way possible, by citing different facts or seeking to create exceptions. And you’re going to have lenders and agents who have cases that may have been recently dismissed or are on appeal where they can now come back to court and file a new motion or complete their briefing.

What should be the next steps for duty officers and lawyers who may have cases affected by this decision?

It is twofold. He looks at the cases that you currently have pending that could be affected by this decision. And really, the impact can only be positive from a service point of view.

A second line of action for repairers is to examine your population who do not have a pending foreclosure file, looking for loans that you may have canceled or that you did not believe you had in good faith to file. a complaint, as it was arguably prohibited by the statute of limitations. There are probably a whole bunch of loans that are not on hold that you can now potentially move forward on.

Editor’s Note: Brian Scibetta and Victoria Arute of McCalla Raymer Leibert Pierce previously wrote about this topic in our January 2021 issue of DS News. You can read this original piece by clicking here.