Acceleration of a debt occurs when a periodic contract amount becomes due all at once. In a case down in Texas, it turns out that in some instances a mortgage lender can abandon an acceleration of a mortgage in a number of ways. While the case discussed here is not in the 9th Circuit where Seattle sits, the case may be adopted in part or full in the future. A creditor can abandon the acceleration of a debt either by specific agreement or by actions consistent with abandonment, such as latches or statute of limitations(delay in bringing an action). In re Williams, No. 16-33276 (Bankr. S.D. Tex. Aug. 3, 2017)
In a Chapter 13 case, the debtor Durwyn Williams defaulted on his mortgage from U.S. Bank Trust which was then being serviced by Caliber Home Loans. Caliber accelerated the balance due on the Note in the year 2010, and later started foreclosure actions against the home securing the mortgage. In 2014, with the foreclosure still ongoing, Caliber sent Mr. Williams another notice repeating the information that his property was in foreclosure and there was a balance of approximately $250,000.00. Mr. Williams filed for Chapter 13 bankruptcy in 2016. Caliber then filed a proof of claim, claiming Caliber was owed more than $500,000.00. Williams’ attorney objected. William’s attorney argued proof of claim was precluded by the four-year statute of limitations (again in Texas) triggered when Caliber invoked the Note’s acceleration clause.
Under 5th Circuit, in particular Boren v. U.S. Nat. Bank Ass’n, 807 F.3d 99, 104 (5th Cir. 2015), abandonment of an acceleration can result from either agreement or “other action” of the creditor and debtor. Courts have broadly interpreted that “other action” by the creditor may include acceptance of payments after acceleration or written/verbal assurances that future payments will be made and accepted, intering into a new intent-to-accelerate notice, or institution of new foreclosure proceedings. Here, Caliber argued that it abandoned the acceleration when it sent Mr. Williams the 2014 statement showing an amount that was lower than the total accelerated balance. Caliber cited Leonard v. Ocwen Loan Servicing, L.L.C., 616 Fed. Appx. 677 (5th Cir. 2015) and Boren, 807 F.3d at 99, in which communications from the creditor to the debtor, while not using the word “abandon,” explicitly showed that payment of less than the accelerated balance would prevent foreclosure.
The court however, was not persuaded by Caliber’s. In Mr. Williams’ case, all communications from Caliber to Mr. Williams confirmed the existence of the acceleration by repeatedly reminding Williams that his property was currently in foreclosure and that he should pay the balance of the loan. Aside from this, the statement Caliber pointed to as indicating a balance less than the accelerated balance, was sent after the four year statute of limitations had already expired.
The court also denied Caliber’s contention that it abandoned acceleration when Caliber made advances for taxes and insurance on the property. Looking to Bank of New York Mellon v. Maniscalo, 2016 WL 3584423 *3 (E.D. Tex. March 3, 2016), the court determined that a lender does not abandon acceleration merely by taking action to protect its lien.
In this case there was no abandonment of the acceleration. Caliber failed to foreclose within four years, and therefor lien on Mr. Williams’ property was void to the degree Mr. Williams was objecting to the accelerated amount.
Turning to then to Caliber’s demand for the taxes and insurance, the court determined that the parties’ mortgage contract allowed for payments to be made incident to default by the debtor and for the taxes/insurance to be added to the indebtedness secured by the property. The limitations period that precluded Caliber’s claim for the balance of the mortgage did not also prevent the independent claim for the payment of the taxes and insurance. The court then ordered an equitable lien for Caliber for $65,448.09, representing amounts paid over 4 years to maintain the property.