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The Statute of Limitations for Foreclosures in New York State is unusual in many ways, among them that its beginning and end are the same event, and it has become the focal point of controversy, confusion and changes in the law, resulting the recent Court of Appeals Case of Engel which was overturned by the more recent Foreclosure Abuse Prevention Act. To the extent a defendant can prevail on these issues with a Statute of Limitations defense, its mortgage would be unenforceable, and then the defendant could bring its own legal action for Quiet Title, or the vacating of the mortgage lien from the title.

• What is the Statute of Limitations in a New York State Foreclosure Case?
• What is Quiet Title?
• What is the Engel Decision?
• What is the NYS Foreclosure Abuse Prevention Act?

1. What is the Statute of Limitations in a New York State Foreclosure Case?

The “statute of limitations” in the State of New York for foreclosure actions, per CPLR 213(4), is a six (6) year statute of limitations that measures the time period starting from the lender’s “acceleration” of the mortgage by an overt and unequivocal act, until the lender actually commences a foreclosure action. Statutes of limitations in foreclosure actions in the State of New York are complex, subtle and difficult in that they are not just conceptually difficult but they have also gone through many technical, procedural and philosophical changes. Unlike statutes of limitations in other areas, the statute of limitations for foreclosures in the State of New York has great potential to be influential and decisive over how many foreclosure actions — especially those with long and messy histories — proceed….or do not proceed.

“Statute of limitations” for law suits in general measure the time from when a legal cause of action arises in real life to when it is actually brought to a courthouse as a newly commenced law suit. A statute of limitations acts like a kitchen timer which forces a potential plaintiff to start a litigation within a finite amount of time, or before the bell rings that “the time is up” and the cause of action is considered no longer legally enforceable or “stale”.

The two main questions in every litigation statute of limitations are:
(1) when does the statute of limitations start?; and
(2) when does the statute of end?

Using our analogy: what causes the the timer to turn on and begin its count-down and what makes it stop before the bell rings and the dish is overcooked and no longer edible.

For foreclosures, the statute of limitations in New York measures the time from when the cause of action for a foreclosure arises (the start of the running of the 6 years time period for the statute of limitations) to the time the lender takes the foreclosure cause of action to court in the form of a new law suit (the end of the running of the 6 years time of the statute of limitations) The role of the statute of limitations in foreclosure matters as with other kinds of litigation is to prevent litigation of stale claims, where evidence and memories fade and to give a sense of order and certainty to society so there is shared knowledge as to when matters are too old to be foreclosure litigation risks. The questions as to the start and end of the statute of limitations for foreclosure actions in the State of New York has been the subject of confusion, legal debate and changes in the law, as follows:

The question as to when does the statute of limitations start for foreclosures in the State of New York has been resolved with the act of “acceleration” or where the mortgage holder, acting under the terms of the mortgage and the note, declares that the entire amount due under the mortgage; so that the whole balance is now due in full. An acceleration is usually based on the borrower defaulting in making its monthly mortgage payments and failing to cure or catch up on the arrears or other reasons under the mortgage note agreements. But the default by itself is not the acceleration without the lender assertively choosing to call for the full loan to be paid. Once the mortgage is accelerated, the mortgage holder is no longer asking the borrower to simply cure their past arrears, but declares the entire loan amount immediately due.

A. When Does the Statute of Limitations Start or Begin for Foreclosures in the State of New York? Or When is there an “Acceleration” of the Amount Due Under the Mortgage?

So now that we have the answer as to when the statute of limitations begins — which is that it begins upon an “acceleration” — the next question is what specific acts cause an “acceleration”? The cases have ruled that an “acceleration” requires an overt and unequivocal act or statement that makes clear that the entire mortgage balance is immediately due. A simple default in paying the mortgage, by itself, is not an acceleration, since it can be resolved by paying the arrears. Paying the arrears, especially in the beginning of a default, when the arrears are still small or manageable, is a relatively simple solution that avoids acceleration. The cases have also held that letters from the mortgage holder to the borrower that generally state that: the borrower is in default; that demand payment on the arrears by a date certain; and/or state that if the default is not cured the loan could, may and/or can be accelerated — are are not in themselves an acceleration. There is no acceleration if a letter demand is in any manner contingent about the acceleration and states, as most do, that if the arrears are not paid by a certain date, the lender “may accelerate”. For a letter to be an “acceleration letter”, it would need to be an overt act or statement in order to “accelerate” the mortgage. Essentially, an acceleration letter must be very blunt about the loan being affirmatively accelerated and being immediately due in full, so that the mortgage holder is ready to enforce the acceleration. Because very few lender letters are so precise, so assertive and so certain with the demand in the present for the full balance, courts have generally ruled that the start of the statute of limitations or the “acceleration” is when the lender actually commences their cause of action in foreclosure by filing the summons and complaint initiating the action. When the foreclosure action commences, all the requirements for an overt and unequivocal act to demand the full balance on the loan are met without any contingency or ambiguity.

Because mortgage acceleration has been deemed to be a contractual remedy, the trigger for starting the foreclosure statute of limitations has been largely placed in the hands of a mortgage holder. By effectively making “acceleration” the commencement of the foreclosure action, the courts to a large extent have given the mortgage holder control as to when the statute of limitations begins in a foreclosure manner.

B. When Does the New York State Statute of Limitations for Foreclosures Actions End or Stop? Can there be a “De-Acceleration”? 

Generally when it comes to most statutes of limitations, the more serious question is what starts the statute of limitations (which we just discussed, above) and not what ends or stops the statute of limitations. It is because the start or trigger for each litigation cause of action that is different depending on the type of action, while the ending or stopping of the statute of limitations is generally the same. The start of the statute of limitations in contractual areas is when the breach of contract occurred; for tort causes of action it is when the tort occurred or when the injury was discovered; and for a statutory obligation it is when the statute was violated. Because causes of action are unique, they have unique starts to their statute of limitations depending on the nature of the cause of action. But generally the statutes of limitations all have a common end point which is the start of the litigation. That is because by its definition, the statute of limitations sets a limit on the time that it takes from the time the cause of action arises to the time it is the packaged into a law suit that is filed with the court.

So the answer as to when does the statute of limitations end or stop — being when the summons and complaint for the cause of action are filed with the court — makes sense because the whole purpose of a statute of limitations is to give the potential plaintiff a deadline to legally assert its cause of action. The ticking of the statute of limitations kitchen timer stops, and is not exceeded when this law suit commencement requirement is satisfied. This is because the statute of limitations is intended to prevent stale claims and encourages timely commencement of litigation. When the litigation is actually commenced and is timely, the statute of limitations stops running.

C. Issues with the Definitions for the Start and End of the Foreclosure Statute of Limitations?

The trouble with these definitions, as to the start and the end of the foreclosure statute of limitations, is that specifically for the foreclosure statute of limitation is that these definitions have problems for several reasons as follows:

1) The Timing of the Beginning and End for the Statute of Limitations for NY Foreclosures is the Same –

The unique contractual nature of foreclosures means that their statute of limitations starts upon “acceleration” which is the same as when the foreclosure action begins. But this beginning to the statute of limitations for foreclosure actions is also its ending. This counterintuitive situation is unique to foreclosures, where the beginning and end of the statute of limitations are the same. This is not a typical legal situation, where the beginning and ending of a deadline are the same. This situation seems like a kind of surrealistic philosophical conundrum, or a kind of of Escher painting of a staircase without a a beginning or end. How can the statute of limitations start and end with the same event…the commencement of the law suit? Is this a workable definition for a statute of limitations? How can the statute of limitations work as any sort of time limit where it starts and ends with the same event? How can a kitchen timer work if the ending bell rings as soon as the timer starts?

The answer to these questions is that the statute of limitations is only applicable as a real measure where there is more than one foreclosure action and the statute of limitations has started in the first action but was never stopped when the action was dismissed. If the second action is filed more than six (6) years after the first action was started (assuming that the six (6) month savings provision under CPLR 205(a) does not apply to extend the statute of limitations), then a potential statute of limitations issue may be raised. While the idea of two or more foreclosure cases sounds like it only applies to a rare foreclosure actions, such circumstances are not rare because foreclosures in New York State have had many technical requirements and new procedural elements over the years, creating difficulties for lender’s counsel who like the lenders and their servicers, may change several times during the course of the foreclosure action, leading to discontinuity.

So the somewhat counterintuitive situation of the same event — the start of the foreclosure case with the filing of the summons and complaint — being the same for the start and end of the statute of limitations, is a more frequent occurrence than one would expect, due to the high rate of foreclosure cases that have been dismissed and then restarted. The question in the fact patterns with more than one foreclosure is always: was the statute of limitations triggered by the commencement of action #1, which if not turned off timely, may have still been running when action #2 was filed and served. Or was the the statute of limitations as triggered in the 1st action, still running in the 1st action at the time the 2nd action started. This scenario could happen if a foreclosure case is dismissed more than 6 years after it started and the new case is started more than 6 years after the 1st case was commenced.

2) The Lender has Complete Control Over the Starting and Partial Control Over the Stopping of the Statute of Limitations for NY Foreclosures –

The definition for the foreclosure statute limitations as based on contractual rights in the mortgage and note, gives the lender significant control over its beginning and ending. Because the right for the mortgage holder to accelerate upon a default, is given to the mortgage holder as part of a mortgage and note agreement, and because acceleration is not automatic upon a default, but requires an overt act by the lender per the Engel decision, the lender has the right to determine whether and when to start the foreclosure action and therefore has complete control over the start of the foreclosure statute of limitations. The Court of Appeals in Engel recognized that historically the lender always had control over the start of the statute of limitation given that they have complete control as when they decide to accelerate the loan in a default situation.

While the start of the statute of limitations is completely in control of the lender, the ending of the statute of limitations is more complex. Since the Foreclosure Abuse Prevention Act (“FAPA”), which was signed into law by the New York State governor at the end of December 2022, the former ability of the lender to also largely control the end date of the statute of limitations has been greatly curtailed. Prior to FAPA, pursuant to the Engel decision, the lender had the unrestricted right to “de-accelerate” the mortgage by voluntarily dismissing its own foreclosure action. Per Engel the voluntary dismissal would stop the statute of limitations so that in a subsequent foreclosure action, the first foreclosure actions’s acceleration of the statute of limitations would have been “de-accelerated” and would no longer be relevant. The filing of the subsequent foreclosure action, started after dismissal of the first foreclosure action, would be the new statute of limitations start date, rather than the earlier commencement date of first foreclosure action. Per the reasoning of the Court of Appeals in Engel, the voluntary dismissal’s causing a “de-acceleration” was the logical flip side and corollary to the lender’s right to engage in acceleration by starting the action. Since the FAPA limited the lender’s right to end the statute of limitations through voluntary dismissal, the lender is now only partially in control of the foreclosure statute of limitations for the ending of the foreclosure statute of limitations. FAPA, in its legislative history, made very clear that it was deliberately passed and worded to overturn Engel, which was viewed by the NYS legislature as part of manipulation of the statute of limitations by mortgage lenders and misconstrued judicial decisions that misinterpreted the foreclosure statute of limitations and gave lenders rights to control their own statute of limitations, which no other plaintiff in the NYS court system had. Per the NYS legislature this has resulted in an abuse of the statute of limitations law to create large loopholes, exceptions and privileges for lenders that distort the legislative meaning and intent of the six (6) year foreclosure statute of limitations and creates an uneven playing field with homeowners with mortgages in distress. The recent passing of FAPA, as discussed below, was intended to deal with these abuses.

D. Is Statutes of Limitations an Affirmative Defense that Could be Waived If Not Asserted in an Answer?

Statute of limitations is an affirmative defense that needs to be asserted by the defendant during the pleadings portion of the case, either in the defendant’s answer and/or in its motion to dismiss. The goal of the defendant when it believes that there is a statute of limitations defense is to dismiss the 2d foreclosure action based on the statute of limitations defense and make it unenforceable for the plaintiff to pursue the foreclosure. Because the defendant does not always know if there was a previous foreclosure action, it should always include statute of limitations as a potential defense in an answer in case it actually is applicable.

2. What is Quiet Title?

“Quiet Title”, generally tis the pursuit of a legal action to vacate liens or other items that the plaintiff believes are wrongly on title, that in a court proceeding are asserted to be inappropriate and subject to a court order allowing their removal from title. In the case of foreclosure matters, a “quiet title action” is usually pursued by the the defendant if it prevails in its statute of limitations defense. The statute of limitations defense if it’s successful could lead to dismissal of a foreclosure case that violates the statute of limitations. The fact that a defendant prevailed in its statute of limitations defense, and a foreclosure action is unenforceable, does not automatically eliminate the mortgage lien associated with the mortgage that is still attached to the property. Technically the lien holder does not need to enforce its mortgage lien to get paid; it can wait to get paid from a voluntary sale or refinance which can technically still happen despite the lack of enforceability of the mortgage. If the owner of the mortgage is very patient, eventually the property will get refinanced or sold and the lien will eventually get paid. However, the law allows the defendant to make a motion for quiet title and remove the unenforceable mortgage. The quiet title action needs to be a separate law suit from any foreclosure action. Although the home owner, who in a quiet title action becomes the plaintiff, usually succeeds in a quiet title action, a lender still has a right to defend itself, especially if it is appealing a decision that quiet title makes its mortgage unenforceable. Also lenders can and have taken positions that payments that made by them for escrow items, during the foreclosure, which are normally the responsibility of the homeowner — taxes and insurance — should be reimbursed to the lender since it was assuming the obligations of the property owner.

3. What is the Engel Decision?

The Engel decision is a group of four appellate division cases decided by the New York Court of Appeals to deal with the issue of the foreclosure statute of limitations. The Court of Appeals tried to assert a uniformity and consistent approach to many inconsistent decisions on the issues of when the foreclosure statute of limitations started and when it ended. There were many varied approaches to these matters prior to Engel and the Court of Appeals sought to address that with a cohesive decision spanning several cases.

A. Pre-Engel Variations on the Statute of Limitations Law

Prior to the Engel decision the area of statute of limitations in the foreclosure area was very litigious because for the lender their entire mortgage worth hundreds of thousands of dollars was at stake and for a borrower, whose mortgage was in distress, there was the possibility of beating the lender and permanently getting rid of their troublesome mortgage. The law evolved on case decision which incrementally decided the following:

a) Voluntary Dismissals – There was great variation in the cases as to whether the lender had a right to “de-accelerate” or end the ticking of the statute of limitations. There was no contractual or statutory right to do this but some courts assumed that the if the lender had the right to accelerate it could “de-accelerate”. There was controversy that even if the lender had this right with what kind of actions the lender needed to take to “de-accelerate”.

b) Stipulated Dismissals – Most cases considered these to end the running of the statute of limitations.

c) Making Payments Under a Trial Modification, Followed by Dismissal – There as controversy if these caused the end of the running of the statute of limitations if the borrower did not get a permanent modification.

d) Accepting a Permanent Modification, Followed by Dismissal – There was uniformity that this ended the running of the statute of limitations.

e) Lender Claiming that a Past Acceleration Was Incorrect – There was controversy where a lender claimed that a prior foreclosure action was commenced by the wrong party and therefore not a proper acceleration.

f) Procedural Dismissals – Generally most technical or procedural dismissal were able to avoid a statute of limitations issue under the savings provision under CPLR 205(a) which extended the statute of limitations by six months.

 B. The Engel Decision and its Effect on Statute of Limitations

Now changes in that vol dismissal was de-accel and stops the f. ;sol from running. So if case voluntarily dismissed after 6 years, there is no SOL that continues to run with the dismiss. This plus safehabor meant that SOL now rare. Hard to find SOL. Engel was a weakening of F SOL and strengthening of control of lenders.

—How this Controlled Trigger is in part the Reason for the Current Issues with Foreclosure SOL. Since gave the P the trigger to start the 6 year count, seemed logical to give the P the right to stop the trigger by ending the action.

Post-ENGEL

Now changes in that vol dismissal was de-accel and stops the f. ;sol from running. So if case voluntarily dismissed after 6 years, there is no SOL that continues to run with the dismiss. This plus safehabor meant that SOL now rare. Hard to find SOL.

4. What is the NYS Foreclosure Abuse Prevention Act?

Post-ENGEL

Now changes in that vol dismissal was de-accel and stops the f. ;sol from running. So if case voluntarily dismissed after 6 years, there is no SOL that continues to run with the dismiss. This plus safehabor meant that SOL now rare. Hard to find SOL.

Post -FAPA

Now clear that no right to deaccelration

Strengthened SOL and curbed loopholes. Reference the Blog. The FAPA did this by:

Clarifying that voluntary dismissal was not a stip to the SOL and overturned the Dr- acceleration of Engels 

Narrowing the savings provision under 205a so that negligent dismissals excluded. 

Clarifying that categories that caused a stopping before: stipulation, payment and other devices lenders used to asset  SOL ended are limited. Didn’t define but presumed to depend on disclosure so defendant making a payment on a trial mod doesn’t lose the defense unless smoke disclosure. 

Idea to clarify that SOL is not n lender control but like othe SOL is s deadline by legislature that should be strictly enforced  5

The safe harbor seriously narrowed Stips to withdraw action need to be very open about lose of rights under sol so that D loses rights knowingly. Cant assert past acceleration was wrong. Effect is a that mortgage foreclosure plaintiffs not given rights not present for the rP’s whereSOL strict.

—In FAPA legislature corrects by taking away right by P to manipulate SOL by deceleration. But also should have taken away right to trigger the SOL with acceleration. Legislature had issue with P ending the SOL ticking. But P also should not have the right to define when the SOL starts to tick. Should be defined as when the D defaults on payment. SOL therefor ends upon the opposite which is curing the default; rather than the ending the foreclosure action.

The safe harbor seriously narrowed

Stips to withdraw action need to be very open about lose of rights under sol so that D loses rights knowingly. Cant assert past acceleration was wrong. Effect is a that mortgage foreclosure plaintiffs not given rights not present for the rP’s whereSOL strict. 

3) There Has Been a Great Deal of Change, Confusion and Controversy in the Law as to the Statute of Limitations for NY Foreclosures –

The law for the statute of limitations for foreclosures in NYS has gone through changes, confusion and controversy. The laws as to what stops the statute of limitations has gone through several changes with the law flipping in several areas as follows:
(i) Whether Voluntary Dismissal is a De-acceleration – Engel ruled that the voluntary dismissal was a de-acceleration, whereas FAPA overturned Engel and decided that a voluntary dismissal could not affect the statute of limitations.
(ii) Whether Most Procedural Dismissals are Covered by the 6 Month Savings Provision of CPLR 205(a) – The 6 month savings clause of CPLR 205(a) was prior to FAPA broad in cover all dismissals that were not on the merits or not voluntary. The savings provision allowed another 6 months to most procedural and negligent dismissals. However, under FAPA the applicability of the CPLR 205(a) was narrowed so most negligent or procedural/technical dismissals would not be saved from exceeding six years if they were dismissed earlier.
(iii) Whether the Lender Can Freely Start a New Foreclosure Action While Another is Pending –
Under FAPA there are stricter provisions than before to prevent a foreclosure plaintiff from starting a subsequent case, while an earlier case is still pending.
(iv) Whether Every Payment or Stipulation or Agreement Ends the Statute of Limitations –
Under FAPA not every payment by the defendant or stipulation signed by the defendant would end the statute of limitations from running. While the kinds of payments or stipulations that would or would not end the statute of limitations from running was not totally specified in FAPA, it is assumed that post-FAPA that these items would not stop the statute of limitations unless the defendant was specifically informed at the time that they are allowing the running of the statute of limitations.

How can our law office help us with our Statute of Limitations Issues and Defend us in The Foreclosure?

We are NYS foreclosure defense experts and can help in any foreclosure defense situation, especially where there are complex facts and arguments.

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