Page 7 - Commercial Litigation

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Commercial Litigation | MONDAY, AUGUST 8, 2016 | S7

arrears for missed installments. The beneit of ple, to verify whether a prior servicer used court’s sua sponte dismissal of a foreclosure if a case is either discontinued voluntarily, or

acceleration is pretty clear: Although a mort- the proper notarization process, ordered their action is not suficient to constitute revoca- dismissed by the court for some procedural
gagee may commence a foreclosure action attorneys to discontinue foreclosure actions.
tion.13 Similarly, a dismissal for failure to reason, and the mortgagee sends a new 90
based on a single missed payment, it simply At the same time, state attorney generals appear for court-ordered conferences does Day Notice, and/or Notice of Default, which
makes no sense to go through a foreclosure as well as the federal agencies began scruti- not qualify as a revocation.14 Neither does only demand the amount of money neces-
to recover just the arrears when accelera- nizing mortgage lenders and servicers, and a dismissal for failure to obtain personal sary to become current on the loan, rather
tion allows recovery of the entire amount began requiring some major servicers, as part jurisdiction.15 It would be safe to say that than the full amount of the loan, is that
in one action. Where the acceleration of a of their participation in the National Mort- where the termination of a foreclosure action suficient?
mortgage is optional, proper acceleration gage Servicing Settlement, to increase safe- occurred without any action by the mort- At least two trial courts have held that the
usually requires some afirmative act by the guards and establish the “right to foreclose” gagee, the courts are unlikely to ind that the mortgagee’s issuance of the 90 Day Notice

mortgagee evidencing its intention to accel- on every property before iling a foreclosure mortgagee took the requisite afirmative act does not evidence intent to revoke any prior
erate the debt.6 An afirmative act could be or proceeding in an active foreclosure. Fore- to revoke the acceleration.
acceleration.20 Citing the mandatory nature
any communication to the mortgagor that closures were in limbo for months, or even Under some circumstances, a mortgagee’s of these notices and the language therein
the mortgagee has elected to accelerate the years. Because cases in New York typically do acceptance of partial payment after accelera- stating that the notices are “required,” the
mortgage debt. Typically, the allegations in not move forward absent afirmative action tion may be suficient to constitute revoca- court found that the requisite intent to revoke
the foreclosure complaint itself are suficient on the part of one of the parties, through a tion of acceleration. Simply accepting pay- acceleration could not be found where a mort-
to constitute acceleration.7 Once this accel- “Request for Judicial Intervention,” a large ment from the mortgagor, without more, is gagee complies with a statutory condition
eration occurs, the mortgagee has the right inventory of foreclosures accumulated, the not enough, especially if the acceptance of precedent. Another trial court has gone so

to demand payment in full, thus the cause so-called “shadow docket”.
payment is accompanied by statements or far as to hold that the issuance of a letter
of action accrues and the six-year statute of Still other foreclosures lingered for months other actions indicating that the acceptance of revocation is insuficient.21 Because the
limitations begins to run on the entire mort- or years while the courts struggled to pro- of payment does not change the acceler- mortgagee elected to accelerate the mortgage
gage debt.8
cess the volume of backlogged cases, or the ated nature of the debt.16 If a mortgagee’s debt, it was bound by that election and could
How Lenders and Servicers Came to Care servicer and borrower negotiated for a loan acceptance of payment is to be construed as not avoid the consequences thereof simply
About the Six-Year Statute of Limitations. New modiication or other type of loss mitigation revocation of the acceleration, the mortgagee by revoking the acceleration.
York’s six-year statute of limitations would that ultimately was unsuccessful.
would be required to offer some additional
seem, at irst blush, to be more than ample. As a result of these new pressures, ser- evidence that its acceptance of the payment
In the past, mortgage lenders and servicers vicers often made the decision to discontinue has caused it to treat the acceleration as Conclusion

did not need to worry about hitting a statute a foreclosure action, and start anew. But in revoked.17
Revocation of acceleration of a debt has
of limitation on their accelerated debt if, for some cases, the six-year statute of limitation Courts have seemed to hold that a court’s become an important tool in for mortgagees
whatever reason, an initial foreclosure action period was about to run out, particularly since dismissal of a case is insuficient to revoke seeking to foreclose on what otherwise might
needs to be discontinued and recommenced. new Notice of Defaults and New York Real acceleration. When the plaintiff mortgagee soon be time-barred debt. New York courts
Beginning in 2008, events collided to force Property Proceedings and Actions Law §1304 afirmatively discontinues a case, is that suf- have provided little guidance on what type
lenders, borrowers, and courts to look anew Notices (90 Day Notices) need to be sent.
icient? When an action is discontinued, “it of afirmative action is suficient to constitute
at foreclosure actions and their statute of Revoking Acceleration: The Answer to is as if it had never been; everything done in revocation of acceleration of the mortgage
limitations.
the Pending Statute of Limitations Problem? the action is annulled and all prior orders in debt. As trial and appellant courts are con-
Of course, the irst event was the Great In order to preserve the mortgagee’s right the case are nulliied.”A mortgagee’s vol- fronted with this issue in the near future,
18
Recession of 2009, in which droves of people to foreclose, servicers began sending Revo- untary discontinuance would at least entail practitioners can expect more guidance in
lost their jobs and with it, their ability to pay cation Letters. The premise has been long some action on its part, and theoretically, if this murky area.
their mortgages. Add to this the fact that recognized by courts—even after accelera- the mortgagee discontinues its foreclosure, •••
many of the loans were underwritten poorly, tion, a mortgagee, by some afirmative act, then the election to accelerate contained in ••••••••••••••••••••••••••
so that borrowers were not able to withstand may revoke its election to accelerate the the complaint should be nulliied. One trial 1. N.Y. C.P.L.R. §213(2).
a loss in employment. Consequently, the num- loan.10 To be effective, the act of revocation court has supported this rationale, hold- 2. Ely-Cruikshank v. Bank of Montreal, 81 N.Y.2d 399
ber of foreclosures skyrocketed, and neither must take place within the six-year statute ing that the acceleration resulting from the (1993).
3. Reid v. Inc. Vill. of Floral Park, 107 A.D.3d 777 (2d
mortgage servicers nor courts could keep up. of limitations period.11 A timely revocation commencement of a foreclosure action was Dep’t 2013).
4. N.Y. C.P.L.R. §213(4).
New York foreclosures became among the may nonetheless be rejected by the court revoked by the subsequent voluntary discon- 5. Pagano v. Smith, 201 A.D.2d 632 (2d Dep’t 1994).
lengthiest, if not the lengthiest, in the nation. if the mortgagor can demonstrate substan- tinuance of that foreclosure action before the 6. Ward v. Walkley, 143 A.D.2d 415 (2d Dep’t 1988).
7. Arbisser v. Gelbelman, 286 A.D.2d 693 (2d Dep’t 2001).
Some mortgage servicers failed to adequately tial prejudice.12 Revocation withdraws the mortgagor appeared and within the six-year 8. Loiacono v. Goldberg, 240 A.D.2d 476 (2d Dep’t 1997).
review foreclosure ilings submitted to the mortgagee’s demand for payment in full limitations period.19 No appellate court has 9. N.Y. C.P.L.R. §3012-b.
court (remember “robo-signing”?). As a result, and restores the loan to its original terms weighed in on whether a voluntary discon- 10. Fed. Nat. Mortgage Ass’n v. Mebane, 208 A.D.2d 892
in 2010, the Ofice of Court Administration with installments due every month. Although tinuance is suficient to revoke acceleration (2d Dep’t 1994).
issued Administrative Order 548/10, which the statute of limitations would continue to of the debt.
11. Id.
12. Golden v. Ramapo Improvement, 78 A.D.2d 648 (2d
required attorneys to submit an afirmation run on each individual monthly installment, In addition to discontinuing its foreclosure, Dep’t 1980).
that attested to the veracity and accuracy of because the demand for the entire amount a mortgagee may also communicate with the 13. Fed. Nat. Mortgage Ass’n v. Mebane, 208 A.D.2d 892
(2d Dep’t 1994).
all of the facts submitted in support of the was revoked, the limitations period on the mortgagor to convey its revocation of accel- 14. EMC Mortgage v. Patella, 279 A.D.2d 604 (2d Dep’t 2001).
foreclosure action, including whether assign- entire debt ceases to run, thereby allowing eration. The form of this communication may 15. Clayton Nat. v. Guldi, 307 A.D.2d 982 (2d Dep’t
ments of mortgage and other documents were the mortgagee to accelerate the debt in the be a simple letter or a more formal looking 2003).
notarized correctly. The Administrative Order future based on any of the monthly defaults “Notice of Revocation of Acceleration,” or, as 16. UMLIC VP v. Mellace, 19 A.D.3d 684 (2d Dep’t 2005).
was later superseded by Administrative Order within the previous six years.
some servicers say “Notice of Deacceleration” 17. Lavin v. Elmakiss, 302 A.D.2d 638 (3d Dep’t 2003).
431/11 in 2011, and codiied into law in 2013.9
Perhaps because the concept of revoca- of the note and mortgage. No cases directly 18. Stone Mountain Holdings v. Spitzer, 119 A.D.3d 548,
549 (2d Dep’t 2014).
The effect of the Attorney Affirmation tion of acceleration was so rarely used, New address what these letters must say.
19. 4 Cosgrove 950 v. Deutsche Bank Nat. Trust, 2016
requirement was to place tens of thousands York courts have not directly addressed the Without an explicit statement of revoca- WL 2839341 (New York Cty. Supreme Ct. 2016).
of foreclosures into purgatory, as attorneys issue of what constitutes a proper revocation tion, can a mortgagee’s communications with 20. Beneicial Homeowner Service v. Tovar, 2014 WL
8770905 (Suffolk Cty. Supreme Ct. 2014); U.S. Bank Na- tional Assoc. v. Henry, 2015 WL 5915281 (Kings Cty. Su-
and mortgage loan servicers grappled with of acceleration. Many courts have, however, the mortgagor, in which it does not demand preme Ct. 2015).
how to comply with the new law. After years of identiied facts and circumstances which do the full amount owing under the note, work 21. Soroush v. Citimortgage, 2016 WL 676288 (Queens
delay, servicers, who were unable, for exam-
not constitute revocation. It is clear that a
as revocation of acceleration? For instance,
Cty. Supreme Ct. 2016).

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