Court gives servicers more time to restart cases but kills voluntary dismissal strategy
HSBC won one foreclosure fight and lost another on January 28, giving mortgage servicers a roadmap and a warning about New York's tougher rules.
New York's appeals court handed down two decisions that Wednesday that every foreclosure shop needs to understand. They show exactly where the new Foreclosure Abuse Prevention Act helps you and where it absolutely does not.
The first case started back in 2005 when Nina St. Hillaire took out a mortgage on her Brooklyn property. She modified the loan twice in 2008, then stopped paying in early 2009. HSBC filed to foreclose in July 2013, asking for the full amount due.
But the bank made a mistake. Under New York law, foreclosure notices have to go out in separate envelopes. HSBC missed that requirement, and the court dismissed the case in March 2022. The dismissal order was entered and served on March 29, and nobody appealed.
HSBC tried again, filing a new foreclosure case on September 9, 2022. Here's where things got interesting. The bank served the papers using the nail and mail method, which means the process was not officially complete until October 20.
St. Hillaire and the other defendants saw an opening. They argued the case came too late. Under the state's CPLR 205-a statute, you get six months from when the first case ends to start a new one and finish serving everyone. They said the clock started ticking on March 29 when the dismissal order was entered, which meant HSBC's October 20 completion date missed the deadline by three weeks.
HSBC had a different take. The bank said you have to count 30 extra days after the dismissal to give people time to appeal or ask the judge to reconsider. That would push the deadline to late October, making their case timely.
The appeals court sided with HSBC and reversed the dismissal. Justice Mark Dillon wrote that the six-month window does not start until 30 days after someone gets served with the dismissal order. Why? Because during those 30 days, you can still file an appeal or ask the court to take another look. The case is not really over until those options expire.
Using that math, the 2013 case ended on April 28, 2022, giving HSBC until October 28 to finish everything. They made it with eight days to spare.
The decision cleans up confusion across New York courts about when this six-month period actually begins. Different judges had been using different dates, which created traps that caught even careful lawyers off guard.
But the second decision from that same day tells a different story. In a separate case against Richard and Fortune Djmal, HSBC tried to foreclose on a mortgage where the bank's predecessor had filed back in 2010, then voluntarily dropped the case in 2015. Two more attempts followed in 2014 and 2015, also dismissed or dropped. HSBC filed again in August 2019.
The court threw it out. Once you start that statute of limitations clock by filing the first foreclosure, you cannot reset it by voluntarily dropping the case and starting over. The law now says clearly that voluntary dismissals do not extend, revive, or reset the deadline.
HSBC argued the new rules should not apply to old cases and violated constitutional protections. The court disagreed, following recent precedent from New York's highest court.
So, here's what mortgage servicers need to know. The appeals court gave you more time to work with when restarting a dismissed foreclosure. But you cannot use voluntary dismissals to buy more time on the statute of limitations. Plan your foreclosure timeline carefully from the start, because you might only get one real shot at it.
