Statute Of Limitations Sinks Lender…Yet Again

It seems absolutely incredible that mortgages would be declared void because of the running of the statute of limitations.  After all, the applicable limitation period is six years.  As we have asked in previous alerts and articles, how would a lender or servicer allow a mortgage to lie dormant for six years only to then have the statute of limitations bar any ability to enforce the debt?

The answer is that they probably would not do that, but what has happened – repeatedly – is that litigation continues for something beyond six years, the action is then dismissed, the earlier acceleration (from years ago) survives and six years has run since then so that the statute of limitations now precludes any further action.  A recent case adds yet a new twist to this. [UMLIC VP, LLC v. Malace, ____ A.D.3d ____, ____ N.Y.S.2d ____ (2d Dept. 2005)].

This case involved a suit on a note – but the principle applies to a mortgage foreclosure.  Here, a lender accelerated the debt and years had passed before the action was started or the years were consumed by a combination of time from when the action was begun until it wended its way along.  In any event, borrower submitted a check for partial payment after acceleration.  The lender accepted the money, duly advising the borrower that they would remain liable for the balance of the accelerated debt even after the partial payment was accepted.  When much later an assignee of the obligation started an action – and more than six years after the acceleration – the question was whether the acceptance of the partial payment after acceleration was an affirmative act revoking the acceleration and thereby halting the running of the statute of limitations?  The court held that it was not.  The acceleration survived, six years had run since manifestation of the acceleration and therefore the action on the note was barred – yet another example of delay destroying a lender’s case.        

Mr. Bergman, author of the four-volume treatise, Bergman on New York Mortgage Foreclosures, LexisNexis Matthew Bender (rev. 2017), 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.