A New York court just showed how missing steps in foreclosure cases can stop lenders from enforcing loans — and why timing matters more than ever.
A New York court has put mortgage lenders on notice: missing steps in foreclosure cases can cost you the right to enforce a loan.
On July 2, 2025, the Appellate Division, Second Department, upheld the dismissal of a foreclosure action brought by Deutsche Bank National Trust Company as trustee. The court ruled that the case was time-barred and that Deutsche Bank couldn’t rely on New York’s six-month grace period because the earlier foreclosure was dismissed after the lender failed to follow a court order.
Here’s what happened. Back in November 2005, Juan Pena took out a $364,000 mortgage loan from New Century Mortgage Corporation on his Queens property. In June 2006, Deutsche Bank National Trust Company, as trustee (referred to in the decision as Deutsche Bank 1), filed a foreclosure action. The bank’s complaint at that time made clear it was accelerating the loan — making the full balance due immediately.
Fast forward to December 2014, and that foreclosure case was dismissed because Deutsche Bank 1 didn’t comply with a prior court order. The bank tried to undo that dismissal in 2018 but was unsuccessful. By November 2020, its appeal of that failed effort was deemed dismissed.
In October 2020, Deutsche Bank filed a new foreclosure action — this time as trustee for New Century Home Equity Loan Trust, Series 2005-D. But Juan Pena moved to dismiss, arguing that the case came too late. The court agreed, pointing out that the six-year clock started ticking when the debt was accelerated in June 2006. That meant the statute of limitations expired in June 2012, well before the 2020 case was filed.
Deutsche Bank argued it could rely on New York’s six-month savings rule to refile after the prior dismissal. But the court found that the Foreclosure Abuse Prevention Act (FAPA), which took effect in December 2022, controlled. Under FAPA, lenders can’t rely on the six-month rule if their earlier case was dismissed because of failures like not complying with court orders — which is exactly what happened here.
The bank’s argument that FAPA shouldn’t apply retroactively didn’t hold up, either. And because Deutsche Bank didn’t plead or prove that it was acting on behalf of the original plaintiff in the first foreclosure case, it couldn’t rely on the savings provision even if it had applied.
For mortgage professionals, this decision highlights the importance of following foreclosure procedures carefully. Under FAPA, lenders and servicers face stricter limits and can’t count on a second chance if their first case is dismissed because of procedural mistakes.
