HSBC Loses As New York Court Tightens Foreclosure Deadline Rules

The Supreme Court of Suffolk County initially ruled in favor of HSBC, granting the bank’s motion for summary judgment and denying Barrett’s cross-motion to dismiss the complaint. Barrett appealed, and the case went to the Appellate Division, Second Judicial Department.

On appeal, the appellate court reversed the lower court’s ruling. The judges determined that the six-year statute of limitations began running when HSBC accelerated the debt by commencing the 2011 foreclosure action. The court cited the Foreclosure Abuse Prevention Act (FAPA), effective December 30, 2022, which states that voluntary discontinuance of a foreclosure action does not de-accelerate the debt or reset or revive the statute of limitations. Once a lender accelerates a mortgage debt by commencing a foreclosure action and seeking the full balance due, the statute of limitations begins, and discontinuing the action does not restart the clock.

HSBC argued that the 2011 complaint did not constitute a valid acceleration because it was unverified and that their counsel lacked authority to accelerate the debt. The appellate court rejected these arguments, finding that the commencement of the 2011 action and the demand for the full balance were sufficient to accelerate the debt under New York law. The court also rejected HSBC’s challenges to the retroactive application and constitutionality of FAPA.

As a result, the appellate court denied HSBC’s motion for summary judgment and granted Barrett’s cross-motion, dismissing the foreclosure complaint as time-barred.

For mortgage professionals, this decision highlights the importance of monitoring statutory deadlines in foreclosure actions. The ruling clarifies that, under New York law and the Foreclosure Abuse Prevention Act, lenders cannot revive expired foreclosure claims by discontinuing and refiling cases. The outcome underscores the need for careful compliance and risk management in handling mortgage enforcement actions.