Adam Swanson discusses an important residential real estate case he is litigating on behalf of a mortgage investor client, which is probing the constitutionality of the retroactive application of a provision of the New York Foreclosure Abuse Prevention Act (“FAPA”). The provision at issue concerns the new New York “savings” statute under FAPA, which substantially limits the rights of mortgage holders to refile foreclosure claims that are involuntarily dismissed. Adam notes that a pending ruling on a request to appeal to the New York Court of Appeals an earlier ruling in the case may have resounding implications for sellers and purchasers of nonperforming loan pools. Because portfolios of nonperforming or re-performing mortgages are often sold to investors, these new provisions hampering the mortgage purchaser’s ability to foreclose in New York may undercut the sellers.
The banks and other financial institutions may also be unable to generate liquidity from these mortgage assets. “The retroactive application of FAPA, this provision or other provisions … may depress the value of those mortgages,” he said. It is likely, for example, he said, that any mortgages held by entities in receivership that are in the midst of foreclosure may become “untransferable” and “worthless.”