Free Homes in New York – Statute of Limitations on Foreclosures
In New York, lenders have six years from the moment that default is entered in an account and the loan accelerated to file a foreclosure action. Failure to file within that time frame means that lenders may be prohibited from ever filing the foreclosure. Without filing, lenders are limited in their ability to collect on the debt and may have to wait until the homeowners transfer the property to get paid. This is because the lien remain on the property even the lender cannot do much to collect.
Take the case of the Kovars. Their motion to dismiss for statue of limitations violations was granted by the court. As expected, the lender has appealed and the issue will likely have to be resolved by New York’s highest court. One lawyer was quoted as saying that, “There’s going to be a giant wave of them,” referring to cases like the Tovars.
Banks and servicers have a way around the rule by simply revoking the acceleration on the loan. And as a lawyer representing the lending industry indicated, both sides of lawyers are looking for these types of cases so it is likely that they will not a significant number litigated. In addition to revoking acceleration, lenders are likely to grant modifications to avoid protracted legal fights.