by Richard P Haber, Esq. and Brian P. Scibetta, Esq.
McCalla Raymer Leibert Pierce, LLC
USFN Member (AL, CA, CT, FL, GA, IL, MS, NJ, NV, NY, OR, TX, WA)

In a long-awaited decision providing some welcome news to servicers and investors, the Court of Appeals (New York’s highest court) issued a combined decision today relating to multiple foreclosure appeals involving statute of limitations issues. Most critically, the Court held that the voluntary discontinuance of a foreclosure action serves to revoke acceleration and de-accelerate the debt, where the filing of the foreclosure complaint was the act of acceleration.

A vast population of loans previously thought to be subject to a statute of limitations bar and total lien loss fit that fact pattern – a prior foreclosure complaint that served to accelerate the debt ultimately resulted in a voluntarily discontinuance. As a result, servicers now have a viable foreclosure path that did not exist yesterday on numerous loans. USFN played a key part as an amicus in connection with this aspect of the case, especially because the decision makes evident that themes and arguments advanced in USFN’s amicus brief were persuasive to the Court’s reasoning.

Additionally, the decision overturns two Appellate Division rulings concerning acceleration. The Court held that acceleration does not occur automatically after a servicer sends a default notice containing language that the servicer “will accelerate” the mortgage debt if the default is not cured by the specific date provided in the letter. And further, the Court held that a foreclosure complaint that fails to plead that the loan had been modified similarly does not serve to accelerate the mortgage debt. These aspects of today’s decision provide additional relief to servicers insofar as it further limits the population of loans potentially suffering from a statute of limitations bar.

Text of the decision may be downloaded here.

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February 2021 e-Update