New York’s attorney general has made five companies that bought old second mortgages pay more than $480,000, including more than $242,000 in restitution to homeowners billed for debt that had expired. The buyers acquired more than 3,000 of these “zombie” mortgages in the state and filed more than 140 foreclosure lawsuits. They must now drop their demands for expired payments.
Where the $480,000 came from
The attorney general’s release, dated October 23, 2026, splits the money in two. Penalties come to $240,000, and restitution is more than $242,000. The restitution goes to consumers who paid or agreed to pay debt that had expired under the statute of limitations. Restitution, unlike a penalty, is money meant to go back to the people who paid.
The companies are BCMB1 Trust, First Age, LLC, NS194, LLC, Second Start, LLC and Southern MBA Trust, along with their affiliates. The release gives no count of homeowners who will be repaid and no per-person amounts. It also states no deadline to claim, so no form is waiting.
The people closest to this case are homeowners with a second mortgage from before the 2008 financial crisis who stopped hearing about it. A letter, a lawsuit or a payment plan tied to such a loan is what the settlement addresses. Anyone with one in the file has a reason to read the release.
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How a second mortgage that went quiet came back
The office found the debt buyers bought thousands of defaulted mortgages across New York, most of them second mortgages originated in the years before 2008. Those loans went unpaid for years. Often the primary mortgage had been modified and the lenders stopped collecting on the second.
Homeowners frequently received no statements about them, the release says. Years later, a new owner appeared with a foreclosure suit. The office found the companies sued to recover expired debt, and some sought the full principal plus interest going back as far as 12 years.
New York’s statute of limitations bars collecting past-due payments more than six years old. The suits asked for more than the law allows. The attorney general ties that gap directly to homes put at risk.
The buying began in 2019. By then the loans were at least 11 years old, since they were originated before 2008. A debt that old, bought in bulk, arrives with little paperwork behind it, which is why a statement showing the last payment date matters more than the amount a new owner demands.
What the companies have to stop doing
Under the settlement the companies must drop all demands for expired mortgage payments in any ongoing foreclosure case. They must amend their demands in existing cases to exclude expired debt. They are also barred from seeking to collect expired debt payments in the future.
Attorney General James said, “No New Yorker should face losing their home to a predatory company demanding mortgage payments that have long since expired.” James added, “I will not tolerate illegal schemes that put New Yorkers’ homes at risk.”
The relief covers the expired payments, not the whole loan. The release does not say that any homeowner’s entire second mortgage was wiped out. Payments inside the six-year window may still be collectible, which makes the dates on a statement the first thing to check. Homeowners who still owe payments inside that window should not read the settlement as a cancellation of the loan.
Homeowners named in one of the more than 140 lawsuits are the most directly affected. The terms apply to ongoing foreclosure cases, so the plaintiff has to amend its demand. The release does not say who tells homeowners about the change, so the court file and the lawyer of record are the places to look.
Reading a demand on an old second mortgage
The Consumer Financial Protection Bureau explains that a debt is time-barred when the statute of limitations has run out, and that collectors generally cannot sue or threaten to sue over it. The debt does not disappear, though, and the bureau warns that a partial payment or an acknowledgment may restart the clock, depending on state law.
That warning matters here because the release covers people who agreed to pay expired debt, not only those who paid. A homeowner sued on a time-barred claim generally has to raise the defense, the bureau adds. A court may still rule against someone who does not appear.
A collector generally must send validation information at first contact or within five days: the creditor’s name, the amount owed and how to dispute it. The bureau suggests asking for evidence that the person is the correct debtor and for how the amount was calculated, and keeping copies of every letter.
Homeowners with a complaint can file with the attorney general’s Consumer Frauds and Protection Bureau through the online form or at 1-800-771-7755. People who are deaf or hard of hearing can call 1-800-788-9898.
Getting letters about an old second mortgage?
A payment or a signed plan on a mortgage that expired years ago can restart the clock the settlement just stopped. Homeowners who answer a demand before checking dates may pay a debt a court would not have enforced.
The Bank Account & Debt Protection Kit lays out the debt-validation steps for making a collector prove a debt before any money moves. It includes a debt inventory, call log and deadline tracker that records each letter, call and date, the evidence a dispute depends on.
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This article was produced with AI assistance and edited for accuracy against the sources linked above.
