Mortgage Servicing Fraud
occurs post loan origination when mortgage servicers use false statements and book-keeping entries, fabricated assignments, forged signatures and utter counterfeit intangible Notes to take a homeowner's property and equity.
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William A. Roper, Jr.
Another recent New York Supreme Court Appellate Division case handed down by the 2nd Department contains an interesting discussion as to the effects of the statute of limitations.  Frequent Forum participants may recall that this has been a prior topic of discussion.

Generally, limitations begins to run with default, but this is as to default of each scheduled payment.  Only when the mortgage investor expressly accelerates the principal (which is elective) does limitations begin to run on the full outstanding balance.

The case is Wells Fargo Bank v Cohen and the court found that while some of the defaulted payments were properly subject to limitations, the facts seemed not to show that the balance had been accelerated and therefore most of the debt had not been precluded by limitations.

The full text of this case can be found at:

Wells Fargo Bank v Cohen,  2011 NYSlipOp 00506  (App Div, 2d Dept. 01/25/2011)
http://www.nycourts.gov/reporter/3dseries/2011/2011_00506.htm

Defendants would be well advised to carefully archive the notice of acceleration.  It might come in handy when the case is dismissed after the limitations period has passed.  Refiling might be precluded by limitations!

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Bill

Under what circumstances would the statute of limitations be tolled?  Lets say a lis pendens was filed (never canceled) and the balance of the note was accelerated in 2005, and a person filed a chap. 13 petition in 2005.  in '07 stay was released and a Mod. was given by an entity that didnt take assignment of the mortgage until 2009.

My question is, since the original note balance was accelerated in 2005  and the mod might be considered void because of the assignment issue, does the clock stop because of the BK or do they have to cancel the acceleration? and does the the six years still run until 2011. 
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William A. Roper, Jr.
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Angelo said:
Under what circumstances would the statute of limitations be tolled?  Lets say a lis pendens was filed (never canceled) and the balance of the note was accelerated in 2005, and a person filed a chap. 13 petition in 2005.  in '07 stay was released and a Mod. was given by an entity that didnt take assignment of the mortgage until 2009.

My question is, since the original note balance was accelerated in 2005  and the mod might be considered void because of the assignment issue, does the clock stop because of the BK or do they have to cancel the acceleration? and does the the six years still run until 2011.


Angelo:

You are asking questions a bit beyond my knowledge, experience and pay grade.  When you get into areas like the question you present, you are going to have to look for cases, but also very often have to expect that there is going to be some analysis by the court.

Generally, time that a matter is stayed pursuant to a civil stay in bankruptcy tolls limitations.  That is, you cannot hope to hide behind a civil stay and then later emerge from behind this shield to assert immunity based upon limitations.

My uninformed LAY GUESS is that the effects of the modification are going to depend rather critically on the precise contractual language of the modification.  Usually the language of such modifications is pretty OPPRESSIVE.  To the extent that the language actually effects some sort of reinstatement or reaffirmation by the borrower, it seems likely that this is going to tend to result in the treatment of the modification almost as a new loan.  But the language is probably the most critical thing.  Then there is the question as to whether the modification is actually valid and effective.  How far the argument that the modification was a nullity or void carries is really quite unclear.

You need to bear in mind that there is likely to be very little appellate case law on these kinds of issues, but that the courts are generally going to enforce agreements freely reached by the parties.

Best of luck with your research!
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