by Julie Molteni, Esq.                                   

Quality Loan Service Corp.

USFN Member (CA)

Kristin McDonald, Esq.

McCarthy & Holthus LLP
USFN Member (AZ, CA, CO, ID, NM, NV, OR, TX, WA)

The United States District Court for the District of Arizona ruled that, in certain circumstances, the notice of intent to accelerate may constitute a deceleration of the loan when evaluating a statute of limitations claim.  Hummel v. Rushmore Loan Mgmt. LLC, 2018 U.S. Dist. LEXIS 132358 (D. Ariz. Aug. 7, 2018). 

In Hummel, borrowers sought to quiet title and enjoin a non-judicial foreclosure of the property.  They alleged that Arizona’s six year statute of limitation barred the foreclosure from proceeding.  The borrowers defaulted on their loan in 2009 and in February of that same year, the servicer issued a notice of intent to accelerate the loan.  In February 2011, the servicer sent a second notice of intent to accelerate.  A Notice of Trustee’s Sale was recorded in February 2013, but the sale was cancelled the following month.  While other foreclosure notices and notices of intent to accelerate were issued, the court focused on the 2009 and 2011 notices of intent to accelerate when evaluating the statute of limitations claim.

Despite noting that there was a question of fact as to whether or not the loan accelerated in 2009, the court ruled that the statute of limitations defense was not available to the borrower because the 2011 notice of intent to accelerate actually decelerated the loan.  In making this conclusion, the court noted that the 2011 notice of intent to accelerate that was sent to the borrower contained the necessary language to revoke the acceleration.  Specifically, the notice contained statements conveying that (1) the borrower is in default, (2) the borrower has a right to cure the default by paying less than the full debt, and (3) the creditor might accelerate the debt if the borrower does not cure the default.   Since the 2011 notice was transmitted to the borrower and contained the requisite statements, the court held that for the purposes of evaluating the statute of limitations, the 2011 notice of intent to accelerate actually decelerated the loan.  It granted summary judgment on the issue in favor of the servicer and beneficiary.

This ruling provides post-Andra R Miller Designs LLC v. U.S. Bank NA^[1] clarity for processing non judicial foreclosures with aged defaults.