Two Legal League member law firms—Stern & Eisenberg and Hladik, Onorato & Federman LLP—have announced the filing of a federal class action lawsuit in the U.S. District Court for the Northern District of New York on behalf of mortgage holders and servicers across the state.
The lawsuit challenges the application of the New York Foreclosure Abuse Prevention Act (FAPA), which extinguished enforcement rights in thousands of valid mortgage loans by altering the statute of limitations. The complaint alleges that this legislative change unlawfully deprived mortgage holders of vested property and contract rights, in violation of the U.S. Constitution.
“By stripping assignees of mortgages of their right to enforce longstanding mortgage contracts, the State of New York has effectively taken private property without just compensation,” said Steven K. Eisenberg, Partner at Stern & Eisenberg.
The proposed class consists of all mortgage holders, investors, and servicers whose ability to enforce their mortgage rights were extinguished or impaired by the application of FAPA. The lawsuit seeks declaratory relief and just compensation for affected parties.
In late 2022, New York State Gov. Kathy Hochul signed the Foreclosure Abuse Prevention Act into law, a measure drafted to provide additional protections to homeowners facing foreclosure proceedings, particularly those who have been subjected to abusive practices by plaintiffs and mortgage servicers. The Act also aims to prevent disproportionate manipulative practices against people of color.
“This action by New York undermines the integrity of contract law and destabilizes the housing finance system that relies on predictability and fairness,” said Stephen M. Hladik, a Partner at Hladik, Onorato & Federman LLP and Chair of Legal League’s Advisory Council.
The class action asserts claims under:
- The Takings Clause of the Fifth and Fourteenth Amendments to the U.S. Constitution
- The Contracts Clause of the U.S. Constitution
- The Due Process Clause of the Fourteenth Amendment
“Our clients, and the mortgage industry as a whole, deserve clarity, stability, and respect for the rule of law,” said Eisenberg.
Eisenberg serves as Founder, Managing Shareholder and CEO of Warrington, Pennsylvania-based Stern & Eisenberg. Eisenberg has an extensive background in real estate and corporate matters, including acquisition and sale of businesses and assets. Stern & Eisenberg focuses on the representation of lenders and servicers in the enforcement and protection of their interests in the legal process, including foreclosure, bankruptcy, evictions, title claims, loan modifications, and litigation.
“This case is about protecting fundamental constitutional rights and ensuring that the State cannot upend settled expectations through retroactive legislation,” added Hladik.
Formerly a Deputy Attorney General in charge of the Harrisburg office of the Pennsylvania Bureau of Consumer Protection, Hladik serves as Partner with Hladik, Onorato & Federman LLP, bringing a broad range of experience to his mortgage foreclosure, bankruptcy, tax sale, and UDAP experience to his practice. A graduate of Pennsylvania State University, Hladik obtained his law degree from Widener University, with honors, where he served as Internal Managing Editor of the Law Review. Hladik gained significant expertise in lending law enforcement while serving in the Pennsylvania Attorney General’s Bureau of Consumer Protection, handling UDAP, FDCPA, RESPA, and TILA cases. Headquartered in Montgomery County, Pennsylvania, Hladik, Onorato & Federman LLP represents clients in Pennsylvania, New Jersey, Michigan, and Arizona.
Legal League is a professional association of financial services law firms in the U.S., positioned to drive progress in the mortgage servicing industry.
