Deaccelerating The Mortgage By Letter

By now, lenders and servicers are all too painfully aware of the relationship between acceleration and the statute of limitations: once acceleration is manifested, either by letter or initiation of foreclosure, if that action is dismissed, and six years have elapsed since acceleration, the statute of limitations is a bar to enforcing the mortgage.  (There is a limited exception allowing the action to be begun anew within six months, but as noted, it has limitations; too often dismissal is a total bar.)

The underlying problem is that dismissal of a foreclosure does not also dismiss the acceleration.  That survives – it remains intact.  But, as a new case confirms, just as a mortgage holder can accelerate a debt, so too can it deaccelerate the debt. [Correa v. U.S. Bank, N.A. 2018 N.Y. Misc. LEXIS 260, citing appeal level authority.]  This revocation is accomplished by an affirmative act on the lender’s part affording the borrower notice of the deacceleration (again, not accomplished simply by dismissal of the foreclosure action).

It always seemed apparent that the requirement of an affirmative act of deacceleration would be achieved by a clear, unequivocal letter to that effect to the borrower.  Until now, however, no case had actually confirmed that.  This case does:  the letter constituted an unequivocal affirmative act to revoke acceleration of the mortgage debt.

While the variety of language to accomplish the purpose ought not be mysterious, an edited version of the successful language in the reported case might be instructive:

Previously your loan was accelerated and all sums secured by the mortgage were declared immediately due and payable.  _______________ Bank hereby deaccelerates the loan, withdraws its prior demand for immediate payout of all sums secured by the mortgage and reinstates the loan.

Mr. Bergman, author of the four-volume treatise, Bergman on New York Mortgage Foreclosures, LexisNexis Matthew Bender (rev. 2018), is a partner with Berkman, Henoch, Peterson, Peddy & Fenchel, P.C. in Garden City, New York. He is also a member of the USFN, The American College of Real Estate Lawyers, The American College of Mortgage Attorneys, an adviser to the New York Times on foreclosure issues and writes a regular servicing column for the New York Law Journal. He is AV rated by Martindale-Hubbell, his biography appears in Who’s Who In American Law and he has been for years listed in Best Lawyers In America and New York Super Lawyers.