Still More On The Statute Of Limitations (Servicer Wins One)


15 July, 2007


Mortgage Lender and Servicer Alerts

Whenever we alert our readers to statute of limitations problems, we always feel constrained to mention that it is not just an academic exercise.  Because the applicable statute of limitations is six years on enforcing a mortgage (or a mortgage note), it is hard to believe that a lender or servicer could ever be victimized by such a defense.  No mortgage holders (it seems) would twiddle their thumbs for all those years ignoring their rights.

But it does happen — often enough — and so when some clarification appears in case law it is worthy of attention.  In the recent case in point, the borrower’s statute of limitations defense failed so this is more pleasing to report [Sarva v. Chakravorty, 34 A.D.3d 438, 826 N.Y.S.2d 74 (2d Dept. 2006)].

To clarify the notation about this happening with surprising frequency, we should mention that in many of the cases the stunned lender was not an institutional entity. Private mortgagees can sometimes be less systematized.  But this can be a problem even for the dedicated if an action is litigated or delayed for years and only after the sixth year has passed is the action dismissed.  Then when the lender tries to begin the foreclosure anew, the statute of limitations has run.

With all this in mind, let’s review a few basics which help appreciate this new case.  This is important, not incidentally, because we regularly receive questions about the statute of limitations and so this should be helpful.

The key element is answering the question, when does the six years begin to run? First, observe that the statute runs separately on each installment.  So, if a borrower misses a payment (and the lender does not declare the balance due) that installment remains unaffected by the statute of limitations for six years.  When the six years has expired, while that old payment is no longer collectable, all the payments which came due thereafter are available.  If, however, after that first missed payment (or more typically after three) the lender accelerated the balance and then did nothing, collection upon the entire mortgage would be barred six years after the acceleration.  Thus, most issues focus upon when a mortgage matured.  This can happen by acceleration, or if the mortgage simply matures by its own terms after 5, 10, 15, 20 or 30 years — whatever the length may be.

With this introduction, we look at the new case where the mortgage matured by its own terms and the lender began a foreclosure within six years of that maturity date. However, there had been some testimony by the lender that he believed he had sent a letter to the borrower way back in 1988, expressing a desire to be paid in full. But the letter never came into evidence and the borrower said he had never gotten any communications from the lender accelerating the debt.  At the same time, the borrower had continued to make periodic payments on the mortgage note for many years, thus negating any claim that the debt had been accelerated.

Had there been an acceleration back in 1988, then six years would have run on maturity and the lender would not have been able to collect.  But there was no such acceleration, and so the action was timely.  The lender won.

Mr. Bergman, author of the four-volume treatise, Bergman on New York Mortgage Foreclosures, LexisNexis Matthew Bender (rev. 2017), is a partner with Berkman, Henoch, Peterson, Peddy & Fenchel, P.C. in Garden City, New York. He is also a member of the USFN, The American College of Real Estate Lawyers, The American College of Mortgage Attorneys, an adviser to the New York Times on foreclosure issues and writes a regular servicing column for the New York Law Journal. He is AV rated by Martindale-Hubbell, his biography appears in Who’s Who In American Law and he has been for years listed in Best Lawyers In America and New York Super Lawyers.