New York Court Holds Notice Reinstituting Monthly Payments Sufficient to Decelerate Mortgage Loan

The New York Supreme Court, Kings County, recently found that a notice sent by a mortgagee which reinstitutes monthly payments and states that any prior acceleration is revoked is sufficient to constitute a deceleration of the underlying loan. Carter v. U.S. Bank Trust, N.A., 2021 WL 291198 (N.Y. Sup. Ct. Jan 27, 2021). Taken with the state Court of Appeals’ recent decision in Freedom Mortg. Corp. v. Engel, it is now clear that lenders in New York have at least two means by which to decelerate a loan: by voluntary discontinuance of a foreclosure action or by sending an affirmative notice of deceleration. In the case, Defendant had a mortgage on Plaintiff’s Brooklyn property, and when Plaintiff defaulted on her payment obligations, Defendant brought a foreclosure action on October 27, 2010, which was later dismissed. On October 25, 2016, two days before the statute of limitations would expire, Defendant’s loan servicer sent Plaintiff a deceleration notice, in it identified itself as servicer for Defendant and stated, in relevant part: "Please be advised that to the extent any previous acceleration may be applicable, we hereby revoke any prior and currently applicable acceleration of the loan, withdrawing any prior demand for immediate payment of all the sums secured by the security instrument and re-institute the loan as an installment loan." Plaintiff did not dispute that the notice was received before the statute of limitations had run. Plaintiff later brought an action to quiet title to the property, and Defendant moved for summary judgment, arguing that it had decelerated the loan by way of the notice.

The Kings County Supreme Court granted summary judgment in favor of the Defendant. While in New York, a six-year statute of limitations begins to run upon the acceleration of a mortgage debt, a "lender may revoke its election to accelerate the mortgage . . . by an affirmative act of revocation occurring during the six-year statute of limitations period." The Court found that the language contained in Defendant’s notice was more than sufficient to constitute an affirmative act of revocation, as it "clearly and unambiguously demanded a resumption of monthly installment payments," and also "provided monthly billing statements which list 'Regular Monthly Payments' and indicate that the mortgage should be paid in monthly installments and not in lump sum." Accordingly, the Court found that "the notification in question was an affirmative act that effectively de-accelerated the mortgage, before the statute of limitations had run."

For a copy of the decision, please contact Michael O’Donnell at modonnell@riker.com, Michael Crowley at mcrowley@riker.com, Desiree McDonald at dmcdonald@riker.com, or Andrew Raimondi at araimondi@riker.com.