New York Appellate Court Renders a Decision

with Significant SOL Implications

On June 12, 2024, the Appellate Division Second Department – New York’s highest volume appellate court – decided an appeal in Trento 67, LLC v. OneWest Bank, N.A. concerning the tolling of New York’s six-year foreclosure statute of limitations. The Second Department hears appeals in several counties, including Kings, Nassau, Queens, Richmond, Suffolk, and Westchester and its decisions are binding on all County trial courts within the Department.

In Trento 67, the appellate court held the United States Department of Housing and Urban Development’s COVID-19-related moratorium on the commencement of the foreclosure of a “federally backed mortgage loan” tolled the statute of limitations within the meaning of CPLR §204(a) (New York’s statutory stay and tolling rule) for the duration of the moratorium. The moratorium applied to “any loan which is secured by a first or subordinate lien on residential real property (including individual units of condominiums and cooperatives) designed principally for the occupancy of from 1- to 4- families that is . . . insured by the [Federal Housing Administration (“FHA”)] under title II of the National Housing Act” but did not apply to a mortgage secured by vacant or abandoned property. “Forward” and Home Equity Conversion “reverse” mortgages were covered by the moratorium. The moratorium arose from the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act and was initially effective during the sixty-day period commencing on March 18, 2020, and was extended by a series of FHA Mortgagee Letters that extended the moratorium through July 31, 2021. In total, the FHA moratorium tolled the statute of limitations for five hundred days. The tolling is applicable irrespective of whether the loan was previously accelerated or the loan was due for unpaid installments.

The Second Department’s holding is binding on all New York State trial courts because it was a “case of first impression” at the appellate level and will remain binding unless and until another appellate court holds the FHA moratorium did not toll the limitations period. Trento 67 is also “highly persuasive” authority for a United States District Court in New York as well as the Second Circuit Court of Appeals. Mortgagees can rely on the tolling to disprove a statute of limitations affirmative defense in a mortgage foreclosure as well as a RPAPL §1501(4) “quiet title” claim via which a property owner seeks to cancel and discharge the mortgage as time-barred. Given the high volume of statute of limitations-related challenges – particularly after the Foreclosure Abuse Prevention Act became effective on December 30, 2022 – it is imperative that all servicers and counsel rely on Trento 67 whenever applicable. Based on the Second Department’s holding, it is possible this Court would also find Government-Sponsored Enterprise and other government agency foreclosure moratoria also tolled the statute of limitations, and Trento 67 should be relied upon in support of such an argument.