The new law amends New York’s “election of remedies” law to provide that once a foreclosure action is barred by the statute of limitations, a loan owner or servicer is prohibited from bringing any other action to recover the same part of the mortgage debt, including both another foreclosure action and an action to recover a personal judgment against the borrower on the promissory note.2 This could significantly constrain loan owners’ and servicers’ ability to offer loss mitigation options to borrowers whose loans are in foreclosure. ![]() 1 Under the new law, a unilateral action by a loan owner or servicer does not extend the statute of limitations for a foreclosure action, and the loan owner or servicer is time-barred from foreclosing the mortgage after six years from the date the loan owner or servicer first accelerated the loan. A loan owner’s or servicer’s voluntary discontinuance of a foreclosure will no longer re-set the six-year statute of limitations to bring an action to foreclose.Key provisions of the new law that mortgage industry participants should be aware of are: Because the legislation remained unchanged from the time the legislature passed the bill to the time Governor Hochul signed the measure into law, we do not rehash all of the law’s provisions in this Legal Update. We previously addressed the background and events leading up to the introduction and passage of S5473 by the New York legislature in detail. ![]() The new law, which takes effect immediately, threatens to significantly constrain the ability of lenders, servicers and investors to efficiently prosecute foreclosure actions and potentially jeopardizes their ability to recover their mortgage debt with respect to not only foreclosures initiated after the law took effect but also foreclosure actions which were pending as of December 30. While many around the world are setting their calendars forward for the year 2023, residential mortgage loan owners and servicers may need to also look backward in time now that New York Governor Kathy Hochul signed the so-called “Foreclosure Abuse Prevention Act” (S5473) into law on December 30, 2022.
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