How to Clear a Mortgage Lien off Title Using Real Property and Proceedings Law 1501(4)
After a foreclosure action is withdrawn or dismissed in New York, a homeowner can utilize Real Property and Proceedings Law 1501(4) in order to remove the lien from title if the Statute of Limitations has run.
The Statute of Limitations restricts the time that a Plaintiff can commence the action, but in the case of a bank loan with monthly payments not yet due, the statue only begins upon a letter specifically indicating that the loan is being accelerated or upon the commencement of a foreclosure action.
There were tens of thousands of foreclosure actions started in 2007-2010 that were subsequently withdrawn or dismissed because of allegations of robo-signing and the use of fraudulent documents. After the Court instituted a requirement that attorney’s sign off on all of the paperwork as of October 2010, many actions were withdrawn or dismissed, and never recommenced. Those properties are prepared to clear title since it has been more than six years since this began.
If you have a property where a foreclosure action was commenced and withdrawn, and more than six years have elapsed without modifying the loan, you will be able to clear the mortgage lien off title in order to sell or borrow upon the property using RPAPL 1501.
RPAPL 1501(4) states, “Where the period allowed by the applicable statute of limitation for the commencement of an action to foreclose a mortgage, or to enforce a vendor's lien, has expired, any person having an estate or interest in the real property subject to such encumbrance may maintain an action against any other person or persons, known or unknown, including one under disability as hereinafter specified, to secure the cancellation and discharge of record of such encumbrance, and to adjudge the estate or interest of the plaintiff in such real property to be free therefrom; provided, however, that no such action shall be maintainable in any case where the mortgagee, holder of the vendor's lien, or the successor of either of them shall be in possession of the affected real property at the time of the commencement of the action. In any action brought under this section it shall be immaterial whether the debt upon which the mortgage or lien was based has, or has not, been paid; and also whether the mortgage in question was, or was not, given to secure a part of the purchase price.”
Note that under the statute, a property owner, or a person in contract with such a property owner, may commence the action. And that it does not matter whether the debt that the mortgage secured has been paid. There is a requirement, however, that the bank is not in possession or control of the property.