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New York Court of Appeals Considering Two Key Statute of Limitations Cases

Posted By USFN, Wednesday, December 18, 2019

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

New York’s Court of Appeals (highest court) is currently considering two statute of limitations (“SOL”) cases relating to mortgage foreclosures, providing hope that 2020 will be the year that servicers and their counsel finally get some relief, or at least clarity and predictability. 

In Freedom Mtge. Corp. v. Engel, 163 A.D.3d 631 (2d Dep’t 2018), lv. app. granted 103 N.Y.S.3d 12 (APL-2019-00114), which the Court has already agreed to consider on the merits, the issue is whether a lender who exercises the right to accelerate by initiating foreclosure may revoke that election by voluntarily discontinuing the foreclosure action at a later date. The Appellate Division, Second Department found that a lender cannot, by discontinuance alone, revoke the election to accelerate a mortgage debt. However, this is inconsistent with prior New York decisions holding that the discontinuance of a case renders all allegations null and void, as if never made. There is no logical reason why the election to accelerate made in a complaint should not be deemed revoked when all other allegations are voided by the discontinuance.

In Bank of New York Mellon v. Dieudonne, 171 A.D.3d 34 (NY App. Div. Second Dept., March 13, 2019), the servicer has asked the Court of Appeals for permission to appeal from a ruling that rejected a line of cases standing for the proposition that a mortgage drawn on the Fannie Mae/Freddie Mac Uniform Instrument could not be deemed accelerated until the entry of final judgment (i.e., when the borrower loses the contractual right to cure arrears and reinstate the installment contract). In Dieudonne, the Appellate Division, Second Department, held that the lender’s right to accelerate is independent of the borrower’s right to reinstate. The Court held that “[c]ontrary to the plaintiff’s contention, the reinstatement provision in paragraph 19 of the mortgage did not prevent it from validly accelerating the mortgage debt.” Even though “[t]hat provision effectively gives the borrower the contractual option to de-accelerate the mortgage when certain conditions are met”, the lapsing of that right is not a condition precedent to acceleration.

USFN will be moving for permission to file an amicus brief in support of Freedom Mortgage in the Engel case, and has already filed a motion for permission to file an amicus brief in support of the servicer’s motion in Dieudonne. In the brief filed with its motion, USFN argued several policy reasons why SOL reform is needed as it pertains to mortgage foreclosures in New York. Among the reform suggestions offered to the Court by USFN are that Engel and Dieudonne should both be reversed. While these reversals would not necessarily be a cure-all for SOL challenges in New York, they would certainly go a long way to removing the time bar that prevents the foreclosure of many loans today. Stay tuned for updates in the coming months!

Copyright © 2019 USFN. All rights reserved.

December e-Update


Tags:  amicus brief  Bank of New York Mellon v. Dieudonne  foreclosure  Freedom Mtge. Corp. v. Engel  New York Court of Appeals 

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