To What Extent Will New York’s Highest Court Address the Foreclosure Abuse Prevention Act?

New York's Foreclosure Abuse Prevention Act ("FAPA") was passed on Dec. 30, 2022, and amended various provisions of the New York Civil Practice Law and Rules ("CPLR"), General Obligations Law and Real Property Actions and Proceedings Law. Since then, litigation has ensued regarding retroactivity and constitutionality of FAPA.

In October 2024, in East Fork Funding, LLC v. U.S. Bank, National Association, As Trustee For Greenpoint Mortgage Funding Trust Mortgage Pass-Through Certificates, Series 2006-AR6, (2d Cir. Oct. 1, 2024), the 2nd U.S. Circuit Court of Appeals certified a question to the New York State Court of Appeals of whether certain sections of FAPA, codified under CPLR 203(h)(1) and CPLR 3217(e)(2), apply retroactively to a voluntary discontinuance of an action that occurred prior to FAPA's enactment.

The New York State Court of Appeals ("Court of Appeals") quickly declined to answer that question without further explanation. On March 25, 2025, for the second time, the 2nd Circuit certified questions to the Court of Appeals regarding the retroactivity and constitutionality of FAPA.

Specifically, in Article 13 LLC v. Ponce De Leon Federal Bank, --- F.4th ----, (2d Cir. Mar. 25, 2025), the 2nd Circuit certified two questions to the Court of Appeals:

(1) Whether, or to what extent does Section 7 of FAPA, codified at CPLR 213(4)(b), apply to foreclosure actions commenced before the statute's enactment; and

(2) Whether FAPA's retroactive application violates the right to substantive and procedural due process under the New York Constitution, N.Y. Const., art. I, § 6.

Section 7 of FAPA provides, in relevant part, that "[i]n any action seeking cancellation and discharge of record of an instrument described under subdivision four of section fifteen hundred one of the real property actions and proceedings law, a defendant shall be estopped from asserting that the period allowed by the applicable statute of limitation for the commencement of an action upon the instrument has not expired because the instrument was not validly accelerated prior to, or by way of commencement of a prior action, unless the prior action was dismissed based on an expressed judicial determination, made upon a timely interposed defense, that the instrument was not validly accelerated." CPLR 213(4)(b) (emphasis added).

Although the specific FAPA provisions are different from the previously declined certified question, the 2nd Circuit, once again, is seeking answers from the Court of Appeals regarding the retroactivity of FAPA.

Lenders, mortgage servicers and other financial institutions should take note of this case, as the Court of Appeals' answers to these certified questions should resolve whether, and to what extent, Section 7 of FAPA applies retroactively to foreclosure actions that were commenced before the statute's enactment.

If the Court of Appeals rules in favor of the appellant and holds that Section 7 of FAPA does not apply retroactively to foreclosure actions commenced before FAPA's enactment and/or retroactive application is unconstitutional, it would be a significant victory for lenders, mortgage servicers and other financial institutions with aged, defaulted loans because they may still be able to argue that a prior foreclosure action did not validly accelerate the debt; thus, the enforcement of these aged debts would not be time-barred.

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"To What Extent Will New York’s Highest Court Address the Foreclosure Abuse Prevention Act?" by Diana M. Eng, was published in Thomson Reuters Westlaw Today on May 8, 2025.