New York’s new foreclosure law just turned one lender’s delay into a loss
Deutsche Bank just learned an expensive lesson about letting foreclosure cases gather dust. A New York court ruled February 4 that there are no do-overs.
The story starts back in 2005, when a borrower named Jeff Allenstein took out a $474,050 mortgage on a Brooklyn property. He stopped paying in 2007, and Deutsche Bank National Trust Company did what lenders do: they filed for foreclosure in February 2010, demanding the full amount owed.
Then things got messy.
Allenstein and the other defendants never bothered to respond. You'd think that would make things easy for Deutsche Bank, but here's where the trouble began. The bank just let the case sit there. Meanwhile, in 2012, a company called Contact Holdings bought the property, apparently unaware of the pending foreclosure.
Fast forward to September 2014. Deutsche Bank finally asked the court to enter a default judgment since nobody had answered the complaint. The court said no, pointing out the unreasonable delay. But they gave the bank another shot if it could explain itself and show the case had merit.
Deutsche Bank waited another year before trying again in November 2016. Contact Holdings, now realizing it had a problem, jumped in and asked the court to throw out the whole case for abandonment. The lower court sided with Deutsche Bank initially, but Contact appealed.
In January 2022, the appeals court reversed course and granted Contact's request. The original foreclosure case was dead, dismissed as abandoned.
Two months later, Deutsche Bank tried to start fresh with a brand new foreclosure action against Contact. Contact fought back immediately, arguing the case was filed too late.
Here's the critical issue for anyone in the mortgage business: when you file a foreclosure complaint demanding full payment, you start a six-year clock ticking. That's your window to get the job done. Deutsche Bank started that clock in February 2010 when it filed the first case. By the time it filed again in March 2022, more than twelve years had passed.
Deutsche Bank argued it should get extra time under a legal provision that lets you refile certain cases. But there's a new sheriff in town called the Foreclosure Abuse Prevention Act, which took effect in 2022. The law specifically says if your case gets dismissed for neglect or abandonment, you don't get to use that safety net.
The court wasn't buying what Deutsche Bank was selling. The judges noted that the 2010 case was dismissed precisely because the bank abandoned it. Under the new law, that meant no second chance. The statute of limitations had run out.
Deutsche Bank even challenged whether the law could be applied retroactively and argued it violated constitutional protections. The court rejected those arguments too.
The takeaway for servicers couldn't be clearer: once you accelerate a loan and start foreclosure, keep moving. Let your case stall or abandon it, and you might find yourself permanently locked out. The days of endless chances are over in New York.
