On 23 May 2018, New York's Appellate Division, Second Judicial Department (an intermediate appellate court covering a vast swath of "downstate" New York) decided Soroush v. Citimortgage, Inc. – a closely watched case that many in the industry worried would decide the fate of "de-acceleration letters." De-acceleration letters are commonly used by loan servicers as a tool to revive aged defaulted mortgage loans that otherwise would be in danger of becoming time-barred.
The Soroush decision allows de-acceleration letters to live another day. Even better, the decision signals that – as hoped – de-acceleration letters may in fact function as effective tools to revoke a lender's earlier choice to accelerate a loan. This would effectively prevent the statute of limitations to foreclose from running, so long as the letters are timely sent (meaning, within the limitations period) in the manner required by the notice provision of the mortgage. While the decision stops short of explicitly holding that the de-acceleration letter used in the Soroush case saved the loan from becoming time-barred, it leaves open the possibility that the servicer may ultimately be able to prove that it did. In coming to its conclusion in Soroush, the Second Department relied on another case it will soon decide – Soffer v. U.S. Bank – in which use of a de-acceleration letter was accepted by the trial court, after the servicer presented proof that the letter had been timely mailed. The Souroush decision is also a significant win for the industry because the trial court had explicitly held that the de-acceleration letter did not revoke the lender's earlier acceleration of the loan.
The full text of the decision can be found by clicking here.
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