What Legal Practitioners Need to Know
On December 16, 2024, James J. Quail & Associates, P.C. secured a key decision dismissing a foreclosure case under the retroactive application of the Foreclosure Abuse Prevention Act (FAPA). The case of HSBC Bank USA, N.A. v. Min Young You, 203 A.D.3d 706 involved a property at 185 Morton Boulevard in Plainview, NY, highlights the major changes FAPA has brought to foreclosure litigation. Just a week later, In this landmark decision, Appellate Division upheld FAPA’s retroactive application, marking a turning point for lenders and legal practitioners.
Enacted in 2022, FAPA aims to prevent abusive foreclosure practices by tightening timelines and removing certain procedural tools lenders previously used to extend cases. This dismissal shows how FAPA’s retroactive provisions can block foreclosure actions that might have succeeded under older laws.
Case Background
The foreclosure action stemmed from a 2009 lawsuit where the mortgage debt was accelerated. Although the plaintiff's predecessor discontinued the case in 2014, defendants Min Young You and Jin Woong Yu argued the six-year statute of limitations began in 2009 and expired by January 2017, even with tolling during a bankruptcy.
In 2018, the plaintiff filed a new foreclosure action, claiming the voluntary discontinuance revoked the debt acceleration and reset the statute of limitations. However, under FAPA, voluntary discontinuance can no longer be used to toll or reset the timeline.
The court’s decision hinged on four critical findings:
- Change in Law: The enactment of FAPA in 2022 fundamentally altered foreclosure litigation. FAPA explicitly prohibits lenders from using voluntary discontinuance to revoke acceleration or reset the statute of limitations unless specifically authorized by statute.
- Retroactive Application: Citing precedents such as Collins v. Bank of New York Mellon and HSBC Bank USA v. Corrales, the court confirmed that FAPA applies retroactively to all pending foreclosure actions, including those initiated before its enactment.
- Statute of Limitations: The court determined that the six-year limitations period had expired before the 2018 action was filed. This rendered the foreclosure lawsuit untimely and barred the plaintiff from proceeding.
- Constitutional Challenges: The plaintiff argued that FAPA violated the Takings Clause and Contracts Clause of the U.S. Constitution. However, the court rejected these arguments, noting that the plaintiff had no explicit contractual right to unilaterally de-accelerate the debt and that prior law did not guarantee such a right.
The court granted the defendants’ motion for summary judgment, dismissing the foreclosure action as time-barred and vacating the notices of pendency against the property. Additionally, the plaintiff’s motion for foreclosure judgment and sale was denied as moot.
Impact of FAPA on Foreclosure Litigation
This case shows the significant impact FAPA has on foreclosure litigation. By removing lenders’ ability to use voluntary discontinuance to toll or reset timelines, FAPA enforces strict statutory deadlines. Its retroactive application means even ongoing cases are affected, as seen in this decision.
This requires a strategic shift for lenders. Attorneys must closely monitor foreclosure timelines to comply with FAPA’s strict rules. Missing the statute of limitations can result in case dismissals. For borrowers, FAPA provides stronger protection against prolonged foreclosure battles, preventing lenders from extending deadlines and offering more fairness and certainty.