Foreclosure Statute of Limitations

Acceleration of the Mortgage Debt

Mortgage agreements invariably allow the mortgagee to accelerate the entire mortgage debt upon default by the borrower. When the mortgagee accelerates the mortgage debt, the mortgagor becomes liable for the entire mortgage balance rather than the monthly payment. There has been no dispute that acceleration of the mortgage triggers commencement of the six year statute of limitations on the entire mortgage debt. Courts have struggled, however, with what act by the mortgagee suffices to accelerate the mortgage debt. Commencement of a foreclosure action clearly accelerates the mortgage debt, but the Appellate Divisions had divided over the effect of threatening language. For instance, in the Vargas case — one of the cases before the Court of Appeals — Deutsche Bank, as mortgagee, had sent Vargas a letter notifying him that he was in serious default, which he could cure by making payments within 32 days of the date of the letter, and also providing that should he fail to cure the default, the mortgagee "will accelerate [his] mortgage with the full amount remaining accelerated and becoming dues and payable in full, and foreclosure proceedings will be initiated at that time." Eight years after mortgagee sent the letter, mortgagor brought a quiet title action seeking to cancel the mortgage. The First Department, following its precedent in Deutsche Bank Nat'l Trust Co. v. Royal Blue Realty Holdings, Inc., 148 A.D.3d 529, quieted title in the mortgagor, holding that the letter accelerated the debt and triggered the statute of limitations.