Background
Francoise Rouge owns a condominium apartment on West 62nd Street in Manhattan. In 2007, she borrowed $786,450 from JP Morgan Chase secured by a consolidated mortgage. She defaulted and the mortgagee commenced a foreclosure action in May 2011. After a default judgment was entered, the foreclosure action was dismissed in 2020 for lack of personal jurisdiction following a traverse hearing — the First Department affirmed the dismissal in 2021. The note and mortgage were assigned multiple times; U.S. Bank Trust N.A., as trustee of Cabana Series III Trust, became the holder in 2019.
Rouge has made no payments on the loan since 2010. In March 2022, she brought an action under RPAPL 1501(4) to discharge the mortgage on the ground that any action on the promissory note was time-barred by the six-year statute of limitations under CPLR 213(4). The bank argued that the statute of limitations had been tolled under CPLR 204(a) for the entire pendency of its 2011 foreclosure action — roughly ten years — by the election-of-remedies provision of RPAPL 1301(3), which generally bars a noteholder from simultaneously pursuing foreclosure and a separate debt action.
Supreme Court (Kim, J.) granted Rouge summary judgment canceling the mortgage and note. The Appellate Division, First Department unanimously affirmed.
The Court’s Holding
The central question was whether the Foreclosure Abuse Prevention Act (FAPA), enacted December 30, 2022, applied retroactively to cut off the bank’s toll argument. Before FAPA, the Third Department had held in Citimortgage, Inc. v. Ramirez that RPAPL 1301(3) qualified as a “statutory prohibition” that triggered the CPLR 204(a) toll during the pendency of a foreclosure action. The Legislature enacted FAPA specifically to overhaul the provisions that lenders had been exploiting to extend — or manufacture — additional time to foreclose on old loans, including the Engel line of cases permitting de-acceleration resets.
Section 2 of FAPA amended RPAPL 1301(3) so that the election-of-remedies provision no longer qualifies as a “statutory prohibition” triggering a CPLR 204(a) toll. The First Department held that the motion court correctly applied FAPA retroactively: FAPA’s text (Section 10) expressly states that its provisions apply to “all actions commenced . . . in which a final judgment of foreclosure and sale has not been enforced,” and the statute’s history manifests a clear legislative intent to reach back to pending matters, consistent with the Court of Appeals’ holdings in Article 13 LLC v. Ponce De Leon Fed. Bank and Van Dyke v. U.S. Bank, N.A. (both 2025).
The court also rejected the bank’s constitutional challenges. Retroactive application of FAPA’s RPAPL 1301(3) amendment did not violate substantive due process because there is a rational legislative purpose — curtailing abusive foreclosure practices — and the rational means of protecting borrowers from manipulation of limitations periods. On procedural due process, the court held that FAPA did not alter the limitations period; it only removed an improper toll. And on regulatory takings, any impairment of the bank’s right of action was caused by the six-year limitations period itself, not by FAPA.
Key Takeaways
- FAPA’s amendment to RPAPL 1301(3) is retroactive and eliminates the CPLR 204(a) toll that lenders had claimed during the pendency of prior foreclosure actions — borrowers’ RPAPL 1501(4) discharge claims are substantially strengthened on loans where the six years ran without a timely new action.
- Pre-FAPA waiver of statute-of-limitations defenses in loan modification or CEMA (consolidation, extension, and modification) agreements made “at the inception of liability” are invalid under Kassner — lenders cannot contract away a borrower’s right to assert a time bar.
- The First Department has now consistently applied the Court of Appeals’ 2025 FAPA retroactivity holdings, making it increasingly difficult for servicers and trusts holding dormant foreclosure claims to revive time-barred loans through toll arguments.
Why It Matters
This decision is the latest in a string of First Department decisions applying FAPA’s retroactive reach to eliminate toll arguments for lenders on old foreclosure debt. The practical effect is stark: a borrower who has not made mortgage payments since 2010, whose original foreclosure action was dismissed on jurisdictional grounds in 2020, can obtain a court order canceling the note and mortgage — irrespective of the outstanding loan balance — because the lender’s window to commence a new timely action has closed and FAPA stripped away the toll that once kept those claims alive.
For banks, mortgage servicers, and RMBS trustees holding delinquent New York mortgage loans where the original foreclosure action predates 2016, this decision signals that RPAPL 1501(4) discharge actions by sophisticated borrowers are a serious risk. Servicers should audit their portfolios for vintage loans where the six-year statute of limitations has run without a final enforceable judgment, and assess whether FAPA’s retroactive elimination of toll arguments leaves those loans vulnerable to discharge. Practitioners on both sides should familiarize themselves with the 2025 Court of Appeals decisions in Article 13 LLC and Van Dyke, which the First Department is now applying as controlling on FAPA retroactivity.