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Scott E. Mollen Scott E. Mollen

Foreclosures—Second Department Case of First Impression—Statute of Limitations—Reinstatement Provision Was Not a Condition Precedent to Acceleration of the Mortgage And Did Not Prevent Acceleration—Statute of Limitations Commenced When Lender Accelerated the Mortgage—Complaint Dismissed

The Appellate Division, Second Department (court), stated that this decision involved an issue of “first impression for this court.” A plaintiff lender (lender) commenced a mortgage foreclosure action. The lender argued that could not have previously accelerated the mortgage because it “lacked the authority to exercise its contractual option to accelerate the maturity of the entire balance of the loan it seeks to recover.” The lender contended that it was “prevented from validly accelerating the debt by virtue of a reinstatement provision in the…mortgage which gives the borrower the option, under certain circumstances, to effectively de-accelerate the maturity of the debt.” The lender further contended that the statute of limitations (SOL) did not “begin to run until the borrower’s rights under the reinstatement provision in the…mortgage were extinguished.”

The mortgage was a “uniform instrument issued by Fannie Mae and Freddie Mac for use in New York.” Based on the “prevalence of the language used in this uniform instrument, and in light of the divergent conclusions reached in the trial-level decisions interpreting that language,” the court deemed it “appropriate to clarify the legal principles that are relevant to this issue and to set forth the appropriate construction of the language used in these uniform instruments.” The court held that the “reinstatement provision contained in the…mortgage was not a condition precedent to the acceleration of the mortgage and did not prevent the plaintiff from validly exercising its option to accelerate.” Thus, the court held that the SOL “started to run when the plaintiff exercised its option to accelerate.”

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