On March 13, 2019, the Second Judicial Department in New York ruled that the reinstatement provision of Paragraph 19 of the standard FNMA mortgage does not prevent a lender from accelerating a mortgage loan prior to the entry of judgment or the scheduling of the sale. In its decision in Bank of New York Mellon, etc. v. Dieudonne, 2019 NY Slip Op 01732 (2d Dept. 2019), the appellate court upheld the trial court’s decision dismissing the foreclosure action based upon statute of limitations grounds finding that the borrower proved that the mortgage loan was accelerated through the commencement of a prior foreclosure action in 2010, thereby making the commencement of the 2016 foreclosure action untimely.
The appellate court rejected the lender’s arguments that acceleration of the mortgage loan could not have occurred through the commencement of the prior foreclosure action due to the borrower’s right to reinstate the loan under Paragraph 19 of the mortgage. Paragraph 19 of the standard FNMA mortgage provides the borrower with an opportunity to reinstate the mortgage prior to the entry of judgment or a scheduled sale. In reviewing the language of both Paragraphs 19 and 22 of the mortgage, the appellate court determined that the lender’s right to accelerate the mortgage debt under Paragraph 22 was not conditioned on the borrower’s right to de-accelerate the loan under Paragraph 19. Therefore, the lender failed to rebut the borrower’s showing that the mortgage loan was accelerated. This decision directly rejects the widely-cited trial court decision rendered in Nationstar Mtge, LLC v. MacPherson, 56 Misc.3d 339 (Sup. Ct. Suffolk Co., J. Whelan, 2017).
A full copy of the appellate decision can be found using the following link:
For questions on this decision or New York’s statute of limitations, please contact Margaret Cascino, Esq., Stern & Eisenberg’s New York Managing Attorney at firstname.lastname@example.org or 516-630-0288 x1310.
License requirement inapplicable to the mortgage industry and trusts
The Maryland Court of Appeals issued a long-awaited decision today in the consolidated cases of Blackstone v. Sharma, Shanahan v. Marvastian, O’Sullivan v. Altenburg, and Goldberg v. Neviaser, Case No. 040, September Term 2017 argued November 30, 2017. In a 64-page opinion with two dissents, the Court overruled the decision below, held that the legislative intent and history of the statute did not intend to force registration on foreign statutory trusts and remanded the case to the Circuit Courts to be reinstated and handled there consistent with the holding of the Court of Appeals.The Court analyzed the plain meaning of the statutes and the ordinary and dictionary definitions of “doing business” as well as the legislative history and intent and certain studies and reports from Maryland regulatory agencies to reach its conclusion. The Court found that there was never an intent to apply the licensing requirement to the mortgage industry. The legislation was specifically targeted at about 40 debt collection agencies whose primary business was buying defaulted consumer debt and being compensated on a percentage of the recovery. “The legislative history persuades this Court that the General Assembly did not intend to regulate or license the mortgage industry actors, including foreign statutory trusts serving as a repository for mortgage loans, as collection agencies due to the specific exemptions and the limited scope of MCALA.”
The decision clarified the significance and impact of the Maryland Collection Agency Licensing Act (MCALA) codified generally at Md. BUSINESS REGULATION Code Ann. § 7-101 et seq. (2017). Lower courts held that judgments and foreclosure decrees obtained against consumers in violation of MCALA were void and unenforceable and stated that Maryland foreclosures conducted by unlicensed investors were covered by the statute whether the debt servicers were licensed or not. This had the effect of imposing licensing requirements not only on loan servicers who were generally already licensed, but upon investors and trusts holding Notes and secured obligations, who were generally not individually licensed prior to the decisions.
Next Steps for Mortgage Servicers
Pending cases should now be reviewed to determine whether they should resume or be reinstated in compliance with the statute. As a reminder, the statute still contains a number of exceptions to the licensing requirement which may include non-resident borrowers, debt which was not in default at time of acquisition, property for which relief from stay was obtained in a bankruptcy proceeding, certain deceased borrowers, and vacant or abandoned properties. Such situations should be reviewed by a licensed Maryland attorney familiar with both real property and debt collection requirements before proceeding. S&E offers comprehensive default legal services in Maryland out of the firm's regional operations hub in Balitmore, MD.
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