Weekly Real Estate News
New York Attorney General Letitia James has secured more than $480,000 in penalties and homeowner restitution from a group of mortgage debt buyers accused of pursuing payments on long-dormant second mortgages after the applicable collection deadlines had expired.
The October 23 announcement follows a state investigation into BCMB1 Trust, First Age LLC, NS194 LLC, Second Start LLC, Southern MBA Trust and affiliated entities. The attorney general’s office said the companies collectively acquired more than 3,000 defaulted New York mortgages beginning in 2019, many of them second liens originated before the 2008 financial crisis.
More than 140 foreclosure cases
According to the state, the debt buyers filed more than 140 foreclosure lawsuits involving old second mortgages. Some demands sought unpaid principal and interest dating back as far as 12 years, even though New York’s applicable limitations rules bar recovery of past-due installments more than six years old.
The companies must pay $240,000 in penalties and provide more than $242,000 in restitution to consumers who paid or agreed to pay amounts the state deemed time-barred. They must also stop seeking those expired payments and amend demands in pending foreclosure cases to remove them.
The attorney general characterized the conduct as unlawful. The resolution should not be mistaken for a court determination that every underlying second-mortgage lien is invalid or automatically canceled. Nor does it mean that all balances on every affected loan have been extinguished.
How dormant second mortgages resurfaced
Before the housing crash, borrowers sometimes financed purchases with an 80% first mortgage and a second mortgage covering much of the remainder. During the downturn, many modified their first mortgages while second-lien holders stopped sending statements or pursuing collections. As home equity recovered, purchasers of the dormant debt began seeking payment, sometimes through foreclosure.
The Consumer Financial Protection Bureau explains that these so-called zombie second mortgages can resurface years after borrowers believed the obligations had been forgiven or otherwise resolved. Borrowers current on a first mortgage can still face claims involving a separate second lien.
The New York action highlights legal and servicing risks for purchasers of distressed mortgage assets, particularly when payment histories, modifications and statutes of limitations are disputed.
What homeowners should know
New Yorkers who believe they are facing an improper foreclosure can contact the attorney general’s Consumer Frauds and Protection Bureau or call 1-800-771-7755. Borrowers facing a lawsuit should seek qualified legal advice promptly rather than assume an old mortgage is unenforceable.
Primary source: New York Attorney General’s October 23, 2026 announcement. Background: CFPB guidance on zombie second mortgages.
