On November 25, the New York Court of Appeals issued a pair of decisions — Art. 13 LLC and Van Dyke — that provide definitive guidance on the hotly contested and heavily litigated issue of the Foreclosure Abuse Prevention Act’s (FAPA) reach. In both cases, New York’s high court confirmed that FAPA applies retroactively to foreclosure actions where a final judgment of foreclosure and sale has not been enforced, and rejected all constitutional challenges to the statute.
We previously covered the run-up to these decisions and the Second Circuit’s certification in our posts, New York Court of Appeals to Review FAPA’s Constitutionality and Retroactive Application and FAPA in the Spotlight Again: Second Circuit Renews Call for NY Court of Appeals Review.
Key Holdings
- Retroactivity Applies Broadly
- The court held that the legislature “expressly stated” that FAPA applies to “all actions” in which a final judgment of foreclosure and sale has not been enforced, meaning that FAPA governs pending and previously filed matters unless a final judgment has already been executed or enforced.
- The court emphasized that both the statutory text and legislative history “plainly manifest” retroactive intent, including the legislature’s response to perceived abuses and judicial interpretations that FAPA was designed to correct.
- Constitutional Challenges Fail
- The court rejected due process arguments, explaining that parties have no vested right in a specific limitations regime and that FAPA did not shorten the limitations period; rather, it regulates how acceleration, discontinuance, and dismissals affect the existing limitations clock.
- In Van Dyke, the court also rejected a Contract Clause challenge, concluding that any impairment operates in a “highly regulated” foreclosure landscape and reasonably furthers significant public purposes.
- Estoppel and the Narrow Exception
- FAPA’s estoppel rule prevents parties from reversing a prior acceleration of the subject loan to avoid the statute of limitations unless the earlier case was dismissed based on an “expressed judicial determination,” made upon a timely defense, that the acceleration was invalid.
What This Likely Means for Other FAPA Provisions
- Voluntary Discontinuance No Longer Resets the Clock
- The court recognized that FAPA curtails the ability to “de‑accelerate” and reset the limitations period through voluntary discontinuance or other unilateral acts. That rule will apply retroactively in non‑enforced matters.
- Limits on Reviving Actions and Extending Deadlines
- FAPA’s constraints on using refiling/savings mechanisms or informal waivers to revive stale foreclosure claims are expected to be enforced under the same retroactive umbrella, absent an enforced final judgment.
Bottom Line
The Court of Appeals has confirmed that FAPA applies retroactively to foreclosure actions lacking an enforced final judgment and that constitutional challenges do not prevent its application. Expect courts to apply FAPA consistently across its provisions. Lenders and servicers should promptly reassess pending matters, reinforce acceleration and enforcement protocols, and recalibrate litigation strategy to align with FAPA’s framework.