New York's attorney general settled with debt buyers accused of suing over old second mortgages after the legal time limit had passed, and borrowers will get money back.
A group of affiliated debt buyers has agreed to stop trying to collect old second mortgage debt in New York that was too old to collect legally. The state attorney general announced the deal on October 23. The companies must pay $240,000 in penalties, and borrowers who paid or were charged too much will get over $242,000 back.
The attorney general calls these loans "zombie" mortgages. They are second mortgages, often made before the 2008 financial crisis, that went uncollected for years. Many borrowers had already changed the terms of their main mortgage. Then the debt came back to life when a buyer purchased it and filed for foreclosure.
One of the companies bought more than 3,000 seriously overdue New York mortgage loans in February 2019, nearly all of them second mortgages. Since 2020, the companies have brought more than 140 foreclosure cases.
New York gives lenders six years to sue, counted separately from the due date of each missed payment. The attorney general said the companies asked for the full loan balance plus all interest back to the first missed payment. In some cases that went back as far as 12 years.
A federal rule was updated on November 30, 2021 to make clear that suing or threatening to sue over time-barred debt is illegal. The companies then mostly limited their interest demands but kept asking for old principal, the original amount borrowed. The companies neither admitted nor denied the findings.
Restitution comes in two forms. Some borrowers get account credits, where a loan change had folded old, time-barred payments into the balance. Others get checks, if they paid time-barred amounts to settle a foreclosure case. The companies must also ask courts to cancel or change any judgment based on a sworn statement that time-barred debt was owed.
A foreclosure or collection notice on a very old loan does not prove the debt can still be collected. Before paying anything, check when the missed payments were due and ask the collector to show how it figured the amount. A lawyer or a local legal aid office can help review it.
The material does not name the companies. It also does not say how many borrowers will get restitution or how they will be contacted.
If a very old loan suddenly turns up in a foreclosure or collection notice, check whether it is past the legal time limit before you pay.
A federal judge says Delta must face a proposed class action over window seat fees, a case that could cost the airline millions and affects anyone who pays extra for a seat.
Read more: Judge says Delta must face class action over window seat feesA Kuala Lumpur firm now sells a SGD 1,500 check of what ChatGPT, Gemini, Perplexity and Google say about a named executive, after its founder's own test found mix-ups.
Read more: New Audit Checks What AI Chatbots Say About Business LeadersA tax law firm warns that 2026 tax scams use fake numbers, copycat websites and AI voices, and that a rushed demand for money is the biggest warning sign.
Read more: How to spot a tax scam before you send money or personal details
