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THE DEFAULT LETTER DID NOT DECLARE THE MORTGAGE DEBT IMMEDIATELY DUE AND PAYABLE; THEREFORE THE LETTER DID NOT ACCELERATE THE DEBT AND THE FORECLOSURE ACTION WAS NOT TIME-BARRED (FIRST DEPT).

The First Department, reversing Supreme Court, determined the default letter did not accelerate the debt and, therefore, the foreclosure action was not time-barred:

The appealed case directly on point with the dispositive issue here is Vargas v Deutsche Bank [2021 NY Slip Op. 01090], in which the Court of Appeals set a clear standard for determining whether a default letter constitutes a “clear and unequivocal acceleration of a debt.” Applying the long-standing rule … “that a noteholder must effect an ‘unequivocal overt act’ to accomplish such a substantial change in the parties’ contractual relationship,” the Court, in Vargas, held that to constitute a “clear and unequivocal” acceleration of a debt, a default letter must demand from a noteholder an immediate repayment of the entire outstanding loan, and must not also refer to acceleration only as a future event, indicating the debt was not accelerated at the time the letter was written.

… The default letter notified plaintiff that the subject mortgage loan was in default as of September 1, 2010. The letter gave plaintiff 30 days to cure the default by payment of the amount due and owing, which was just over $9,000. It also stated: “Unless we receive full payment of all past-due amounts, we will accelerate the maturity of the loan, declare the obligation due and payable without further demand, and begin foreclosure proceedings.” Thus, as in Vargas, the default letter did not effectuate an unequivocal acceleration of the debt because it did not seek an immediate repayment of the entire balance outstanding on the loan, but rather “referred to acceleration only as a future event, indicating the debt was not accelerated at the time the letter was written.” Kirschenbaum v Wells Fargo Bank, N.A., 2021 NY Slip Op 02073, First Dept 4-1-21

Similar issue and result in Ditech Fin., LLC v Rector 70 LLC, 2021 NY Slip Op 02062, First Dept 4-1-21

 

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