A New York court just shut down HSBC's foreclosure bid — a ruling with big takeaways for lenders
A New York appeals court has upheld a foreclosure dismissal under the state’s Foreclosure Abuse Prevention Act, applying its retroactive rules to HSBC Bank USA.
The case began in 2007 when Richard and Patricia Vesely executed a note and mortgage with First Alternative Mortgage Corp. on their Sullivan County property. The loan was modified in 2010 and assigned to HSBC Bank USA in 2012. By 2011, the borrowers had fallen behind on payments, and in January 2012 HSBC issued a default letter that automatically accelerated the debt.
HSBC filed its first foreclosure action in 2015, alleging default since 2011. In 2018, the Supreme Court dismissed that case for failure to prosecute. HSBC tried to have the dismissal vacated but was denied.
In 2022, the bank filed a new foreclosure action, this time claiming default as of September 2015 and arguing the filing was timely in light of COVID-19 litigation pauses. The Veseleys moved for summary judgment, arguing the claim was barred by the statute of limitations. The trial court agreed, dismissing the action and denying HSBC’s cross-motion. HSBC appealed.
On July 24, 2025, the Appellate Division, Third Department, affirmed the dismissal. The court held that the Foreclosure Abuse Prevention Act, enacted in 2022 and retroactive in effect, governed the case. FAPA was designed to eliminate tactics that had allowed lenders to reset or extend foreclosure timelines, and it specifically overruled prior precedent from the Court of Appeals in Freedom Mortgage Corp. v Engel.
HSBC had argued that its default letter was more like the one in Engel’s companion case, Vargas, which the Court of Appeals found insufficient to accelerate a debt. But the appellate court disagreed, pointing to the 2012 notice’s explicit language that failure to cure would “automatically accelerate the debt.” That acceleration started the six-year limitations period, which expired in 2018. Because HSBC did not file the new foreclosure action until 2022, the claim was time-barred.
For lenders and servicers, the decision signals that foreclosure timelines in New York are strictly enforced under FAPA. Once a loan is accelerated, the clock cannot be reset by discontinuing an action or filing again later. Every default notice and dismissal now carries significant weight, making close tracking of dates and procedures essential for avoiding similar outcomes.
