Between Christmas and New Year’s Day of 2022, New York’s Governor signed legislation designed to correct an alleged potential for “abuse” of the foreclosure process by mortgage lenders. The context for that “abuse” is relatively exotic and unusual. It had nevertheless spawned a series of New York cases. The Legislature’s solution to the “abuse” creates a new pitfall for mortgage lenders when they try to recover their defaulted loans through the foreclosure process.
The legal issues start when a mortgage lender accelerates a loan, which is to say, requires the borrower to repay the entire loan because the borrower defaults in making monthly payments or in complying with other obligations under the loan documents. Once the lender accelerates the loan, New York law gives the lender six years in which to start a foreclosure action. Amazingly, lenders miss that deadline with some frequency.
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