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Perspectives

Spring

Limitations Period Barred Improperly Decelerated Loan Foreclosure

In Nationstar Mortg. LLC v. Huang, Index No. 712312/17 (Sup. Ct. Queens Co. Feb. 5, 2019), the holder of a mortgage on property filed a foreclosure action in September 2017. This was the second foreclosure action as the prior mortgage-holder had initiated an earlier foreclosure action in January 2011. The 2011 action alleged that the borrower had defaulted on the payment of the loan beginning with the payment due in July 2010 and that the mortgagee accelerated the subject mortgage as of January 2011. The 2011 action was discontinued by stipulation in 2012. The current mortgagee moved for summary judgment and the property owner cross-moved to dismiss under the six-year statute of limitations, asserting that the current action was brought more than six years after the debt had been accelerated. Ordinarily, the six-year statute begins to run when each payment is due, but once the entire principal balance has been accelerated, the statute begins to run against the full amount due and the claim becomes time-barred six years later. The court noted that a “plaintiff may affirmatively revoke its election to accelerate a mortgage loan and at some subsequent time accelerate it once again,” thereby avoiding the bar of the statute of limitations.

However here the court found that the stipulation “did not, in itself, constitute an affirmative act to ‘revoke its election to accelerate, since, inter alia, the stipulation was silent on the issue of revocation of the election to accelerate and did not otherwise indicate that the plaintiff would accept installment payments from the defendant.’” In other words, not only must a foreclosing plaintiff affirmatively state its intent to “decelerate” its loan, but it must also “reinstate the mortgage and resume sending the borrower monthly bill statements.” Lenders should be sure to take this step when an impending foreclosure or a foreclosure action is settled and the intent is to allow the borrower to resume making regular monthly payments. The settlement papers should include “explicit” language indicating that the loan has been decelerated. Moreover, in this particular case, the new complaint still sought default interest from the date of the alleged 2010 default, which demonstrated that the loan had not been reinstated and was relying on the original acceleration date.