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New York Court of Appeals Decision Reopens Foreclosure Cases

New York Court of Appeals Decision Reopens Foreclosure Cases

If this is your first visit to my website, welcome! My name is Christine Springer and I'm the founder of Desert Edge Legal Services and the author of the content on this site.

Disclaimer: I’m a paralegal, not an attorney and cannot give you legal advice. This is not meant to be legal advice, and there is no guarantee that the information in this post will work for your individual situation. Please consult with an attorney if you have questions about your individual situation.

The New York Court of Appeals issued a decision in February 2021 that will revive foreclosure cases that had been previously dismissed.

The City, a publication in New York, has an excellent article about the human side to these cases and how it will affect homeowners who thought they were safe from foreclosure.

While I empathize with these people, I am not surprised in the least. The woman in the article, Christine Fife, may have thought she was in the clear, but I would argue that she's really no better off.

She borrowed $731,000 dollars in a cash out refi in 2007!! That debt is not going away on a technicality. She got rid of the foreclosure problem, but she doesn't have clear title to the home and she still owes the debt.

I can't imagine a seasoned foreclosure defense attorney telling this woman that she was not in danger of losing her home again. The foreclosure case was dismissed on a technicality – that doesn't erase the debt or remove the lien.

For some people who just wanted to buy more time to save money or whatever their strategy was, a delay in the foreclosure sale would be a good thing. But for the woman in the news article, her status is still uncertain. And this kind of uncertainty can be just as stressful as dealing with an on-and-off foreclosure sale.

I can't tell you how many people called me up and told me they were entitled to a free house. Somehow, they thought that I could find something wrong with their home loan and that all they had to do was show the report to the judge, and POOF! Free house. This is some magical thinking, ya'll.

The courts did not like some of the arguments, such as "show me the note" early on because they thought the homeowner just wanted a free house. And that is just not equitable (fair) to the person who loaned you the money.

Property analytics are useful to find leverage to get a loan modification, but it is highly improbable that you will get a free house. It might have happened once or twice somewhere in the US in a freak set of circumstances, but most of us are not going to get a free home because of a technicality.

Aside from that, you might be wondering about the six year statute of limitations and why that is mentioned in the article.

Something similar happened to me in the last economic recession. I had just purchased a condo in North Phoenix for $197K in 2007 when subprime crashed.

It was in an apartment building that was being converted to condos. I'll be the first to admit that I had no idea what I was doing back then, and buying that place was not a good idea.

I bought in early April 2007 and subprime crashed on April 14, 2007 and within a few months, my "condo" value dropped $150K, and the economy dried up in Phoenix.

I had literally just started Desert Edge Legal and BAM! The worst economic recession I had ever seen in my lifetime happened.

In 2008 I filed for Chapter 7 and gave the condo back to the "lender." But the lender was in no hurry to foreclose. The property sat empty for a year and a half, because I thought they were going to just take it back. But they didn't, and in December 2010 I moved back in.

I lived there until May 2013 because they didn't want to foreclose on the place. In fact, it wasn't until after I moved back in that they foreclosed on it, and then it took a couple of years before I finally had to leave.

I could write a separate blog post about my own situation, but the point of that side story is that I have been in the position that these people in New York are in, and it still sucks. You don't know what will happen or how long you will live there. And I had already moved out once, and since title was still in my name, I still had to pay condo fees, and by that time the conversion had failed, so it was really just like living in an apartment.

The woman in the news article has been and out of foreclosure for ten years. I don't know why she has not taken steps to move on or work something out.

The uncertainty in this situation can be crippling, and I think she could have gotten herself into a better financial position and filed a Chapter 13 to get back on track to pay the mortgage, or just delveraged and moved somewhere else that she could afford after her disability.

I have had more than a few people contact me for foreclosure help who had been in and out of foreclosure for that long. I think staying in situations past their expiration date is a trauma response, and foreclosure can definitely be a traumatic experience.

The case is called Freedom Mtge. Corp. v Engel 2021 NY Slip Op 01090. This is a Justia link and they also have a summary of the case at the top of the page.

In the decision, the Court of Appeals found that voluntarily ending a foreclosure suit stops the clock on the six-year time limit, even if the homeowner is never notified. Additionally, the court’s ruling applies retroactively to any foreclosure cases ongoing or still open to appeal at the time the decision was issued.

There were actually four cases being appealed on the timeliness of a mortgage foreclosure claim that involved the question of the intersection of contracts affecting real property ownership and the statute of limitations.

The decision means that the foreclosures that were expired under the six-year statutory limit have been or will be reopened or appealed. The news article was from November, 2021, and at that time the moratoriums were still in place because of the pandemic.

In yet another interesting turn of events in this story, the New York Law Journal reported that the judge who issued the decision sided with her own lawyer in this appeal, and she should have recused herself.

What a mess.

There are a couple of laws being considered in New York that would protect homeowners. The City article discusses the new laws toward the end of the article, and it at least looks like lawmakers there are sensitive to these issues.

The legislature can fix the language in the statutes and make it more clear on what the banks must do, but ultimately I think it's up to individual homeowners to solve their own problems.