New York Debt Buyers to Pay $480,000 Over Time-Barred Mortgage Collection Practices

Case Snapshot

• Court: New York Office of the Attorney General, administrative enforcement settlement
• Case: In the Matter of BCMB1 Trust; First Age, LLC; NS194, LLC; Second Start, LLC; and Southern MBA Trust, Assurance No. 26-061
• Decision Date: Oct. 22, 2026 (settlement effective date)
• Core Issue: Collection of time-barred mortgage principal and interest through foreclosure proceedings.
• Key Allegation: Debt buyers pursued expired installment payments on long-defaulted second mortgages.
• Court Holding: None. The matter was resolved through an assurance of discontinuance without a judicial ruling.
• Outcome: $240,000 in penalties and costs, more than $242,000 in restitution, and restrictions and corrective measures addressing time-barred mortgage collection demands.
• Notable Detail: Investigators identified more than 140 foreclosure actions involving the companies, including cases in which principal payments remained in collection demands after interest calculations were adjusted to address the statute of limitations.

New York Attorney General Letitia James has secured more than $480,000 in penalties and consumer restitution from a group of debt buyers accused of pursuing time-barred mortgage payments through foreclosure lawsuits. The settlement, announced Oct. 23, requires the companies to stop seeking expired mortgage payments and correct collection demands in pending foreclosure proceedings.

The agreement with the New York Attorney General’s Office involves BCMB1 Trust, First Age LLC, NS194 LLC, Second Start LLC, Southern MBA Trust and affiliated entities. State investigators found that the companies attempted to recover principal and interest on long-defaulted mortgages, including payments that were outside New York’s six-year statute of limitations.

Debt Buyers Acquired Thousands of Defaulted Second Mortgages

According to the attorney general’s announcement, the investigation centered on mortgages originating primarily before the 2008 financial crisis.

During that period, some homebuyers financed purchases through two mortgages, commonly consisting of a primary loan covering 80% of the purchase price and a second mortgage covering the remaining 20%.

When property values declined during the financial crisis, many borrowers modified their primary mortgages while their second mortgages remained unpaid. In some cases, the holders of those junior loans stopped pursuing payments because the properties had insufficient equity to support recovery.

Years later, as housing values recovered, previously dormant second mortgages became potential collection assets.

The attorney general’s investigation found that BCMB1 Trust acquired more than 3,000 defaulted New York mortgage loans in February 2019, nearly all of which had originated as junior liens and were severely delinquent. Approximately 1,400 were subsequently transferred to other entities.

Since 2020, the companies collectively filed more than 140 foreclosure actions seeking to enforce mortgage obligations.

Investigation Identified Time-Barred Principal and Interest Demands

The central issue involved the calculation of recoverable mortgage payments under New York’s six-year statute of limitations.

According to the settlement, the limitations period generally runs separately for each mortgage installment, subject to applicable legal rules and tolling provisions. Both the principal and interest components of an installment may become time-barred six years after the payment was due.

Investigators found that numerous foreclosure complaints sought the full outstanding principal balance and interest dating back to defaults that occurred more than six years earlier.

The settlement describes one Kings County foreclosure filed in February 2021 involving a mortgage that allegedly defaulted in September 2008.

BCMB1 Trust initially sought $26,327.21 in principal, along with interest accruing at 9.175% from the original default date. In a subsequent 2024 motion, the company reduced the period for which it sought interest but continued to demand the entire principal balance.

According to the attorney general’s findings, approximately $6,372 in principal installments remained included in the demand even though those payments were time-barred, along with additional interest attributable to that amount.

The investigation determined that similar practices occurred in numerous other foreclosure actions.

The companies neither admitted nor denied the attorney general’s findings in the settlement.

Settlement Requires Restitution and Foreclosure Corrections

Under the assurance of discontinuance, effective Oct. 22, the companies agreed to pay $240,000 in penalties and costs to New York and provide more than $242,000 in consumer restitution.

Restitution will be delivered through loan account credits or refund checks, depending on how the affected consumers previously paid or agreed to repay time-barred debt.

The agreement also imposes corrective requirements on the companies’ existing mortgage portfolios and foreclosure proceedings.

Among the requirements, the companies must:

• Stop collection activity seeking time-barred payments on covered New York mortgage loans.
• Amend foreclosure demands to exclude expired principal and interest.
• File amended complaints or notices in applicable pending cases.
• Seek to amend or vacate certain foreclosure judgments based on time-barred amounts.
• Avoid including time-barred debt in future loan modifications.
• Refrain from passing specified legal costs associated with settlement compliance to consumers.

The agreement establishes 30-day deadlines for several corrective actions in pending cases and requires a sworn declaration confirming completion of restitution three months after its effective date.

The settlement does not necessarily eliminate all outstanding mortgage obligations. Rather, it requires the companies to exclude legally time-barred amounts from their collection demands.

Federal Debt Collection Rules Also Address Time-Barred Foreclosures

The findings also implicate the federal Fair Debt Collection Practices Act and its implementing Regulation F.

Under 12 CFR 1006.26, debt collectors covered by the regulation are prohibited from bringing or threatening legal action to collect time-barred debt.

The New York investigation found that the companies continued seeking certain time-barred principal amounts even after Regulation F’s relevant provisions took effect Nov. 30, 2021.

The attorney general determined that the conduct constituted repeated violations of the FDCPA, New York General Business Law Section 349, the state’s Debt Collection Procedures Act, and New York Executive Law Section 63(12).

The distinction between time-barred principal and interest is particularly significant for installment-based debt portfolios. Excluding interest accrued outside the limitations period may be insufficient when the principal component of individual installments is also no longer legally recoverable.