Recent changes by the Texas Legislature may help lenders avoid the running of the statute of limitations on collection and foreclosure actions in certain specified circumstances.
The Texas Legislature passed House Bill 2067, which is effective immediately and will be codified as 16.038 of the Texas CPRC. This impacts the statute of limitations (“SOL”) for foreclosure and specifies a new method for abandonment or rescission of acceleration of a promissory note in order to avoid the running of the SOL.
Generally, there is a four year SOL for foreclosure that accrues from the date the payment obligations under the note are accelerated, or the maturity date of the note. When a borrower defaults, acceleration of the payment obligations is often a prerequisite to foreclosure for a loan that has not yet matured.
This new law seeks to clarify and provide a means by which a lender can abandon acceleration and thus stop the running of the statute of limitations for foreclosure when a loan is accelerated, but collection efforts are subsequently postponed or abandoned due to a workout, litigation, or other reasons.
Anyone handling foreclosures or workouts should be aware of this new provision.
Instead of filing a rescission in the real property records this Rule now allows a lender to send notice of rescission of acceleration to the borrowers in the method described.
There has recently been a divergence in case law regarding whether acceleration could be unilaterally rescinded and what was required to rescind acceleration. This clarifies those issues; however, this is not necessarily the exclusive method for abandonment or waiver of acceleration.
Practical Effect: If a lender, mortgage servicer or attorney has noticed a foreclosure sale and foreclosure is delayed because of a lawsuit, workout, or other reasons, the acceleration should usually be rescinded to avoid the running of the four year statute of limitations. This change in the law makes it easy and clear as to how to do accomplish that.
No information in this article is intended to constitute legal advice. For specific legal advice, please contact an attorney.