Demand for Full Payment Does Not Accelerate Mortgage Maturity Date

Posted by NCBRC - October 18, 2016

Demanding full payment of a mortgage after the debtor’s default did not accelerate the maturity date such that the limitations period for filing a foreclosure action was moved up. Washington v. Bank of New York Mellon, No. 15-3210 (3rd. Cir. Sept. 30, 2016) (unpublished).

Though the mortgage agreement specified a maturity date of 2037, the debtor, Gordon Washington, argued that when Bank of New York demanded full payment and filed its first foreclosure action in 2007, it activated the mortgage agreement’s acceleration clause and established a new maturity date for the mortgage. The foreclosure action failed for lack of prosecution and the creditor filed a new action after Mr. Washington had filed his bankruptcy petition in 2014. Mr. Washington then sought an order to the effect that the creditor no longer had an interest in the property because the limitations period had elapsed.

For purposes of this case, New Jersey sets a foreclosure limitations period at the earlier of either six years “from the date fixed for the making of the last payment or the maturity date set forth in the mortgage or the note,” or twenty years from the date of default. N.J. Stat. Ann. § 2A:50-56.1(a) and (c). The Third Circuit found that the creditor’s initial demand for full payment and foreclosure action did not bring the six year limitations period into play. That court found that the limitations period in subsection (a) makes specific reference to the maturity date of the mortgage agreement, while subsection (c) refers to a post-default limitations period. Thus, the plain terms of subsection (c) applied and the creditor had until 2027 to bring a foreclosure action.


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