We are always cognizant that servicers would typically assume the statue of limitations to prosecute a mortgage foreclosure (e.g. six years in New York) too lengthy to be a practical source of concern. But the statute of limitations does bar foreclosures often enough so that it is a real, practical consideration.
That said and the warning noted, where the foreclosing party is the United States of America or any of its agencies, such as the SBA, there is no statute of limitations which can apply. A recent case confirms the long established principle. [see Fleet National Bank v. D’Orsi, 26 A.D.3d 898, 811 N.Y.S. 2d 502 ( 4th Dept., 2006)]. What will be relevant to our readers is the further concept that an assignee of a federal agency is likewise immune from state statute of limitations constraints.
So if a United States agency holds a mortgage and assigns it, and if there might otherwise be a statute of limitations defense to the foreclosure, it is just not a problem; very comforting.
But just because the SBA, for example, may have guaranteed a mortgage doesn’t mean the SBA was ever the mortgagee. If it was, that needs to be proven, as does the actuality of an assignment from the federal agency to the commercial, non-governmental foreclosing party.
Accordingly, whether a private lender or servicer can avail itself of this protection against the statute of limitations where a federal agency is “involved” becomes an issue to be carefully scrutinized, then to be presented with requisite proof. Without all that, a foreclosure challenged as time barred will stall in place- just what happened in the noted case where summary judgment to the assignee- foreclosing party was denied.
Mr. Bergman, author of the four-volume treatise, Bergman on New York Mortgage Foreclosures, LexisNexis Matthew Bender (rev. 2017), is a partner with Berkman, Henoch, Peterson, Peddy & Fenchel, P.C. in Garden City, New York. He is also a member of the USFN, The American College of Real Estate Lawyers, The American College of Mortgage Attorneys, an adviser to the New York Times on foreclosure issues and writes a regular servicing column for the New York Law Journal. He is AV rated by Martindale-Hubbell, his biography appears in Who’s Who In American Law and he has been for years listed in Best Lawyers In America and New York Super Lawyers.