Key Question on Retroactivity of New York’s Foreclosure Abuse Prevention Act Goes to Second Circuit

The law firm Blank Rome recently reported on a case before the Court of Appeals for the Second Circuit, titled East Fork Funding, LLC v. US Bank, National Association. The key issue in this case is whether New York state’s Foreclosure Abuse Prevention Act (FAPA) provisions apply to a unilateral voluntary discontinuance of a mortgage action that occurred before FAPA was enacted in 2022.

The article notes that FAPA has been heavily litigated, and state courts have issued conflicting decisions, “including whether the statute applies retroactively to conduct before its enactment and whether retroactive application is unconstitutional. Lenders, mortgage servicers, and other financial institutions should note that the Second Circuit has certified the question of FAPA’s retroactive application to the New York Court of Appeals.”

FAPA was enacted in response to a 2021 New York Court of Appeals decision, in which the court ruled that a voluntary discontinuance of a foreclosure action resets the statute of limitation. 

The Appellate Division, Second Department, has often remanded cases for further briefing rather than directly addressing the retroactivity issue, while the First Department upheld retroactive applications without assessing their constitutionality.

The Second Circuit’s decision will bind lower courts and could establish uniformity in handling FAPA-related motions, including those involving de-acceleration letters issued before the Foreclosure Abuse Prevention Act. Until the Court of Appeals decides, delays in litigation over FAPA may persist.

The ruling will have significant consequences for lenders, servicers, and financial institutions. If retroactivity is rejected, lenders could validate foreclosure actions following voluntary discontinuances.

If retroactivity is upheld, some foreclosure actions may become time-barred, benefiting delinquent borrowers or real estate investors. The Court’s decision will ultimately shape the legal landscape for foreclosure litigation under FAPA.