In Bank of New York Mellon v. Dieudonne 2019 WL 1141973 (2d Dept. 2019), the Second Department determined that a mortgage is accelerated by the filing of a complaint to foreclose the mortgage with an election to accelerate. This is true even though a provision in the mortgage preserves the borrower’s right to make installment payments rather than the full debt. Dieudonne will reverberate nationally and through New York.

In the throes of the Great Recession, many foreclosure actions were commenced and ultimately dismissed or abandoned. Among the causes were an overwhelming volume, fluctuating laws, and new regulatory requirements. Financial institutions are now seeking to foreclose those loans and finding that they are barred by the statute of limitations because those old lawsuits accelerated the mortgages years earlier. Courts are giving out free houses but not to homeowners—to real estate speculators who are paying pennies to the homeowner for the right to fight foreclosure.

The law of mortgage acceleration in the Second Department is inconsistent. As it stands, a mortgage accelerates when lawyers file a complaint alleging that the “plaintiff elects to call due the entire amount secured by the mortgage” even though the borrower can still make only installment payments. In contrast, to de-accelerate under Milone, the court examines the lender’s intentions and the lender must send written notice to the borrower of its election to de-accelerate and make a demand for the monthly payment.

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