In a significant development for lenders and borrowers alike, on October 6, the U.S. Supreme Court declined to review the Fox decision, leaving unresolved questions about the retroactive application of the Foreclosure Abuse Prevention Act (FAPA). This decision has shifted the focus to the New York State Court of Appeals where oral argument was heard on October 16, and potentially to the U.S. Court of Appeals for the Second Circuit.

Background of the Case

The dispute began with a mortgage made by the defendant in 2008. After a foreclosure action by the plaintiff bank’s predecessor was dismissed, the plaintiff bank filed a new action under New York Civil Practice Law and Rules (CPLR) § 205(a), which allows for a six-month window to refile a case after a non-merits dismissal. While the second foreclosure action was pending, the New York Legislature enacted FAPA in December 2022, imposing stricter limitations on refiling foreclosure proceedings after a dismissal.

The First Department of the New York State Supreme Court, Appellate Division ruled that the bank’s foreclosure was time-barred under FAPA’s new regulations. After the Court of Appeals rejected the appeal, the bank petitioned the U.S. Supreme Court, arguing that the retroactive application of FAPA violated the Takings Clause of the Fifth Amendment and due process rights.

Legal Implications

The Supreme Court’s denial of certiorari leaves the question of FAPA’s retroactive application to be decided by state and federal courts. The core legal issues include:

  1. Takings Clause Concerns: The bank argues that retroactively applying FAPA extinguished its mortgage lien without just compensation, potentially violating the Fifth Amendment.
  2. Due Process Rights: The bank contends that imposing new legal burdens without fair notice or a legitimate legislative purpose infringes upon its due process rights.

The unfolding legal battle over FAPA’s retroactive application highlights the complexities of legislative changes in foreclosure law. As the courts deliberate, the implications for lenders, borrowers, and the broader financial industry remain uncertain. Legal professionals and industry experts will be watching closely for developments that could reshape the landscape of foreclosure law in New York and beyond.