What Are The Foreclosure Statute of Limitations In New York?

Foreclosure statute of limitations

If six years have elapsed before foreclosure proceedings are initiated, this could be in contravention of the foreclosure statute of limitations in New York.

You should seek legal advice immediately.

Foreclosure is the mechanism for a lender to repossess your home if you fail to maintain payments on your mortgage.

The statute of limitations refers to the maximum time during which legal action can be taken from a specific point in time.

The foreclosure statute of limitations is the period during which a mortgage provider can sue for missed mortgage payments.

● The foreclosure statute of limitations in New York is six years.

So, what does this mean?

In short, if lenders are pursuing you for unpaid mortgage debts in New York when more than six years have elapsed since the date of default or last payment, this is not legal. Foreclosure debts over six years old are referred to as time-barred.

If your mortgage debt is time-barred, the creditor shouldn't threaten you with legal action. This would be baseless.

If your lender is in New York but you live in another state, the law will use the statute of limitations for your state of residence. So if you live in Illinois but your debt originates from a New York lender, the statute of limitations won't expire for 10 years even though it expires in 6 years in New York.

Revived Cases with Expired Statute of Limitations

You might think a signed letter from a mortgage service company would be enough to confirm a mortgage debt is settled.

Sadly, many lending firms are reopening foreclosures previously closed after the 6-year period has elapsed.

Debt collection agencies are also buying closed foreclosure cases from lending companies and using harassment to intimidate people into paying them. Know your rights and don’t allow yourself to be pushed around by unscrupulous lenders.

Stipulation of Discontinuance

The problem arises since confusion abounds as to what defines a canceled debt…

You may have paid the mortgage off or been notified that it had been canceled by the lender voluntarily. But, some lenders are retrieving historical debt cases, arguing that the cases had not been officially closed and that this constitutes a legal right to pursue the debt.

If a lender agrees to cancel an outstanding amount, it has to be proven in court. This is referred to as a stipulation of discontinuance (1). When you and the lender both sign to agree that the loan is written off, it must be filed at court as proof.

So if you and your lender signed an agreement to discontinue the loan, but it wasn't filed in court, you may still be open to prosecution.

A class-action lawsuit in the Bronx (2) is currently being filed against the Bank New York Mellon for unlawfully foreclosing cases beyond the 6-year time limit.

The lawyer is defending a couple who defaulted on their mortgage after the 2008 financial crash which was voluntarily discontinued in 2015. But, in 2019 the couple received demands for payment even though they and the lender had signed to agree the debt was closed.

As 7 years had passed from the date of default, the statute of limitation had expired, the lawyer issuing the debt collector for unlawfully harassing the couple for money.

The lawyer says he is currently handling around 500 cases. This is a number he believes is merely the tip of the iceberg.

Know Your Rights

The FDCPA - Fair Debt Collection Practices Act - (3) states that it's not illegal for a third party to request payment for debt with an expired statute of limitation, but it is illegal for them to threaten legal action if you don't pay.

Thousands of people are unaware of the state of limitation costing them the chance of having their foreclosure canceled. Some debt collection agencies rely on this at the prosecution stage and end up winning cases because the defendant did not know.

So, if you're being sued or have been sued for a debt older than 6 years from the date of default or last payment, make sure you seek legal advice.

What to Do If A Creditor Restarts A Foreclosure

The Federal Trade Commission (4) offers the following advice on what to do if you receive demands for payment…

Check That The Debt Exists

The demand for payment may come from a bogus debt collector. You can check to see if the debt exists by getting a credit report from Annual Credit Report (5).

If a debt does exist but you know nothing about it, you could be a victim of identity fraud.

For cases like this, you can visit the government identity theft portal (6) to help clear things up.

Find Out If The Statute Of Limitation Has Expired

If the debt is your responsibility, find out when your last payment was made.

Write to the mortgage servicer or debt collection agency within 30 days of receiving notification of the debt notice. Whoever is chasing you for money has to stop foreclosure proceedings against you until they have provided you with this information.

If The Statue Of Limitation Has Expired

If the statute of limitation has expired, you have three options:

● Stop paying and write to the lender

● Make a partial payment

● Pay the outstanding amount in full

Stop Paying and Write To The Debt Collection Agency

Send a letter by certified mail requesting that they stop contacting you. It's advisable to keep a copy and opt for a return receipt to prove they received the letter.

The debt collector can only respond in two ways: to agree to leave you alone, or notify you of any specific action being taken against you.

If the statute of limitation has expired on your foreclosure, this is unlawful and you should seek legal advice immediately.

Make a Partial Payment

If you make a partial payment, it's essential you are aware that a new statute of the limitation period will apply from the date that you make that payment. This will give the lender new powers to pursue you for non-payment.

Pay The Debt

If you decide to pay the debt, make sure you keep records of every payment and ask for a signed letter from the collector to prove you are released from the debt.

If you are facing foreclosure, consider speaking with an experienced Long Island foreclosure attorney.  The lawyers at Fine Law Offices are here to help you keep your home.  For a free consultation, call F:P:Sub:Phone} or fill out this contact form.