The six-year clock ran out, and FAPA blocked every argument to restart it
A New York appellate court has cleared a borrower’s title by canceling a $340,000 mortgage - and blocked U.S. Bank from clawing back upkeep costs.
The Appellate Division, Second Department, affirmed the lower court judgment on November 4, ordering the Suffolk County Clerk to discharge the mortgage. The ruling turned on New York’s Foreclosure Abuse and Prevention Act, a 2022 law that has become a recurring problem for lenders holding stale foreclosure claims.
In October 2006, the borrower signed a note for $340,000 with Lehman Brothers Bank, FSB, secured by a mortgage on property in Amityville. By April 2008, payments had stopped.
That July, Mortgage Electronic Registration Systems, known as MERS, filed a foreclosure action as nominee for Lehman. A foreclosure judgment was entered in February 2010 - but a year later, the court vacated it after finding the borrower had not been properly served.
That vacated judgment sat untouched for over a decade. In August 2022, the borrower sued under RPAPL 1501(4) to cancel the mortgage from the public record, arguing the six-year statute of limitations for foreclosure had expired.
The argument: MERS accelerated the full mortgage balance when it filed the 2008 complaint, starting the six-year clock. More than 14 years had passed. Time was up.
U.S. Bank, now holding the loan, pushed back: MERS never had standing to commence the 2008 action, so the acceleration was invalid and the clock never started.
FAPA was built to shut down exactly that argument. Under CPLR 213(4)(b), a defendant cannot claim a mortgage was never validly accelerated unless the prior action was dismissed on “an expressed judicial determination, made upon a timely interposed defense, that the instrument was not validly accelerated.” The 2008 action was tossed for bad service - not on acceleration grounds. Estoppel applied.
The court rejected challenges to FAPA’s retroactive application.
That left the unjust enrichment counterclaim - U.S. Bank’s bid to recover taxes and upkeep it had paid on the property. Dismissed. Under the voluntary payment doctrine, payments made voluntarily with full knowledge of the facts cannot be recovered absent fraud or mistake. U.S. Bank showed neither.
For servicers and portfolio managers holding legacy New York loans, the takeaway is plain: FAPA’s estoppel provision has teeth, and standing defects in old foreclosure actions will not restart the clock.
This is a slip opinion, uncorrected and subject to revision before publication in the Official Reports.
