Adam Swanson speaks to Law360 about the effects of New York’s Foreclosure Abuse Prevention Act (FAPA), passed in 2022, on the financial services industry’s ability to enforce its rights in New York mortgages. FAPA not only changes lenders’ more than century-old ability to reset the six-year statute of limitations for completing a mortgage foreclosure by revoking an acceleration, but also applies retroactively to subject years of foreclosure actions to new scrutiny. The result, Adam says, is creating opportunities for speculators to bring mortgages out of foreclosure by challenging a lender’s rights to the debt and winning title at a fraction of the cost. This dynamic is discouraging institutional investors from buying New York mortgages and mortgage servicing right on the secondary market. “Its hurting the mortgage-holders, the investors, who purchase these loans on the secondary market, along with servicers who service these loans on the secondary market,” he says. One “problem is that Legislature made the process for closing a consumer mortgage so difficult. It’s like walking down a minefield. There are a lot of places things can go south.” And FAPA makes it so that any one mine can lead to a complete loss.
Adam notes that while the bill sponsor of FAPA had claimed FAPA would reduce chaos in the courts concerning mortgage rights, it has had the opposite effect. “It’s really a backlash against both the financial services industry and the courts,” Adam said of FAPA. Since the act’s passage, New York courts have seen a substantial uptick in litigation contesting lenders’ mortgage rights. “I’ve heard from clerks in some courts that they’re so inundated, they cannot even assigned new case numbers to appeals for months at a time.”
Add to these delays, Adam says, the industry is increasingly turning to the federal courts because the state intermediate appellate courts continue to uphold FAPA in what the industry feels is in direct conflict with lenders’ constitutional rights while New York State’s highest court remains silent on FAPA’s provisions. Adam is a member of a team of attorneys advising stakeholders in several lawsuits pending throughout the state and in federal courts about possible outcomes in the East Fork Funding LLC v. U.S. National Bank Association case pending before a Second Circuit panel. “If the East Fork case comes down favorable to our constitutional analysis, we intend to go into all the pending New York state cases where we’ve had unfavorable outcomes and make a motion to review those decisions.”