May 14, 2019
Authored by: Cathy Welker
Does the death of the borrower automatically accelerate a reverse mortgage? In a decision that is good news for reverse mortgage lenders, a recent New York appellate court answered no. In Mortgage Solutions v. Fattizzo, _ AD3d_, (2d Dep’t, May 1, 2019), the New York Supreme Court, Appellate Division, Second Department, considered whether the statute of limitations for enforcing reverse mortgage loans begins to run upon the death of the borrower. Defendant contended that the foreclosure action, filed August 6, 2014, was time-barred by the six year New York Statute of Limitations because the cause of action accrued on the date the borrower died, February 19, 2008.
The Court focused on the language in the reverse mortgage at issue – “[l]ender may require immediate payment in full of all outstanding principal and accrued interest if …” (emphasis added) – and noted that it confers upon the holder of the note and mortgage the option, but not the obligation, to accelerate payment of the debt. The Court held that an affirmative act by the lender was needed to accelerate the debt.
Accordingly, in New York, absent different language in the mortgage, the death of the borrower does not automatically amount to accrual of a cause of action for purposes of the statute of limitations. This is a departure from prior New York case law, although the same conclusion recently reached under Florida law.