Senate Bill S10529

                                 
BILL NUMBER: S10529

SPONSOR: SCARCELLA-SPANTON
 
TITLE OF BILL:

An act to amend the real property actions and proceedings law, in
relation to clarifying that a default judgment against a defendant in a
foreclosure action does not need to be vacated for such defendant to
claim the plaintiff lacks standing or that the statute of limitations
has expired

 
PURPOSE OR GENERAL IDEA OF BILL:

To clarify that, pursuant to section 1302-a of the real property actions
and proceedings law, a defendant in a residential foreclosure action may
assert the defenses of lack of standing and expiration of the statute of
limitations at any time, including after the entry of a default judge-
ment, without first moving to vacate such judgment.

 
SUMMARY OF PROVISIONS:

Section 1: Amends subdivision 1 of section 1302-a of the real property
              

actions and proceedings law to expressly provide that the defenses of
lack of standing and expiration of the statute of limitations are not
waived if there is a default judgment and may be raised at any time,
including after the entry of a judgment of foreclosure and sate, regard-
less of whether that judgment has been vacated.

Section 2: Establishes the effective date and all that applies.

 
JUSTIFICATION:

In 2019, the Legislature enacted section 1302-a of the real property
actions and proceedings law to ensure that homeowners would not forfeit
the critical defense of lack of standing due to procedural default. That
reform reflected the principle that foreclosure actions, which may
result in the toss of a person's home, should be decided on their merits
rather than on technical pleading rules.

Central to that reform is the recognition that foreclosure is an
extraordinary remedy, and only a party with a lawful interest in the
underlying debt should be permitted to invoke the power of the courts to
take a person's home. The requirement that a plaintiff stands at
commencement is not technical, but a fundamental safeguard ensuring that
only the proper party may enforce a mortgage obligation.  Section 1302-a
was enacted to preserve that safeguard.

In practice, however, courts have required defendants who defaulted to
first move to vacate a default judgment under the CPLR before asserting
defenses the Legislature intended to preserve. This requirement imposes
a significant procedural barrier and limits the statute's intended
effect.

Recent appellate decisions illustrate this inconsistency. In U.S. Bank
N.A. v. Eisler, 237 AD3d 999 (2nd Dept 2025), the Appellate Division
held that a defendant who defaulted was required to satisfy the stand-
ards for vacating a default judgment before asserting a standing
defense, notwithstanding section 1302-a. The court ruled similarly in
Ditech Fin. LLC v. Mendonez, 236 AD3d 761 (2nd Dept 2025). Such deci-
sions effectively condition the assertion of preserved defenses on vaca-
tur, preventing courts from reaching the merits in appropriate cases.

Although section 1302-a addressed standing, similar concerns arise with
statute of limitations defenses, which likewise go to the legal viabil-
ity of a foreclosure action. Legislature has underscored the importance
of such defenses in 2022 with the enactment of the Foreclosure Abuse
Prevention Act. Yet where a defendant has defaulted, procedural barriers
may prevent courts from ever addressing whether a claim is time-barred.

As a result, homeowners may face foreclosure even where the plaintiff
lacked standing at commencement or where the claim is untimely.  Requir-
ing vacatur of a default judgment-often years after entry creates a
substantial and, in many cases, insurmountable obstacle, particularly
for unrepresented or financially distressed defendants.  This outcome is
inconsistent with the Legislature's intent in enacting section 1302-a.

This bill clarifies that the defenses of lack of standing and expiration
of the statute of limitations may be raised at any time, including after
the entry of a default judgment and entry of the judgement of foreclo-
sure and sale, without the need for vacatur. It ensures that courts may
reach the merits of these defenses in all cases where a judgment of
foreclosure and sale has not yet been enforced.

The bill does not alter the substantive burden of proof for any party.
Plaintiffs must still establish standing and timeliness, and defendants
must still prove their defenses. The bill removes only an unnecessary
procedural barrier that has led to inconsistent and unfair application
of the law.

By restoring uniformity, reinforcing the requirement that only a proper
party may foreclose, and giving full effect to the Legislature's prior
enactment, this bill promotes fairness, judicial efficiency, and confi-
dence in the foreclosure process.

 
LEGISLATIVE HISTORY:

Chapter 739 of the laws of 2019 added section 1302-a to the real proper-
ty actions and proceedings law to preserve the defense of lack of stand-
ing in foreclosure actions. This bill clarifies and effectuates the
original intent of that enactment.

 
FISCAL IMPLICATIONS:

None.

 
EFFECTIVE DATE:
This act shall take effect immediately and shall apply to all actions
commended on an instrument described under subdivision four of section
two hundred thirteen of the civil practice law and rules in which a
judgment of foreclosure and sale has not yet been enforced.