We previously wrote about the landmark Court of Appeals decision in Freedom Mortgage Corp. v. Engel (2021), which dealt with application of the statute of limitations in mortgage foreclosure decisions. Since Engel, courts have grappled with its application in various circumstance. See our prior article here. A recent Court of Appeals decision, Everhome Mortgage Co. v. Aber (2022) resolved one such issue.
The Engel court held (1) the filing of a foreclosure action accelerates all payments on a mortgage and starts the six-year clock for all payments and (2) the voluntary dismissal of the foreclosure action de-accelerates the mortgage, and stops the clock on future payments. However, courts were split as to whether an involuntary dismissal also deaccelerates the mortgage and stops the clock running on the statute of limitations. The Second Department held that the second part of Engel does not apply to involuntary dismissals, while the Second Circuit has held it does.
In Everhome Mortgage, the Court of Appeals sided with the Second Department. That case involved a second foreclosure action that was held time-barred. The lender had filed a prior action (which accelerated the debt under Engel), but that first action was dismissed without prejudice, based on the lender’s failure to appear for a court conference. The lender waited over six years from the filing of the first action to file a second. Agreeing with the Appellate Division, the Court of Appeals held that the action was time-barred, as the involuntary dismissal did not de-accelerate the loan.
The Engel court held (1) the filing of a foreclosure action accelerates all payments on a mortgage and starts the six-year clock for all payments and (2) the voluntary dismissal of the foreclosure action de-accelerates the mortgage, and stops the clock on future payments. However, courts were split as to whether an involuntary dismissal also deaccelerates the mortgage and stops the clock running on the statute of limitations. The Second Department held that the second part of Engel does not apply to involuntary dismissals, while the Second Circuit has held it does.
In Everhome Mortgage, the Court of Appeals sided with the Second Department. That case involved a second foreclosure action that was held time-barred. The lender had filed a prior action (which accelerated the debt under Engel), but that first action was dismissed without prejudice, based on the lender’s failure to appear for a court conference. The lender waited over six years from the filing of the first action to file a second. Agreeing with the Appellate Division, the Court of Appeals held that the action was time-barred, as the involuntary dismissal did not de-accelerate the loan.