Recent legislation now provides a bright line rule for unilaterally abandoning acceleration of installment loans. Lenders and mortgage servicers often face challenges by borrower seeking to invalidate lienholder interests on statute of limitations grounds that in many cases were caused by compliance with lengthy, federally-regulated, loss mitigation requirements. Texas House Bill 2067, effective September 1, 2015, provides a new and welcomed rule for unilateral rescission of acceleration.
In Texas, foreclosure of a lien must occur within four years of acceleration. Texas authorities are generally not in dispute on what actions a lender must take in order to accelerate a loan containing an optional acceleration clause. Despite generating a significant amount of the relevant caselaw, federal courts sitting in diversity were left with no definitive guidance on the validity of unilateral rescission of acceleration See, e.g., Callan v. Deutsche Bank Truste Co. Ams., No. 4:13-cv-247, 2015 U.S. Dist. LEXIS 35626, at *21 (S.D. Tex. Mar. 21, 2015) ("[T]here is no Texas caselaw on the validity of unilateral notices of rescission of acceleration."). Recently, the Fifth Circuit addressed the issue of unilateral abandonment and found that "a lender can unilaterally abandon an acceleration" under Texas law. Leonard v. Ocwen Loan Servicing, LLC, No. 14-201611, 2015 U.S. App. LEXIS 9827, *7 (5th Cir. June 9, 2015). However, the requirements for unilateral abandonment or rescission remained fact driven, with no particular standard, until now.
House Bill 2067 resolves this uncertainty with the addition of Texas Civil Practice & Remedies Code § 16.038. Section 16.038 allows a lender or loan servicer to unilaterally rescind acceleration of the debt by serving each debtor at their last known address, by first class or certified mail, with notice that the accelerated maturity date is rescinded or waived. Service of such notice does not affect the lienholder's right to accelerate the debt at a later date or waive prior defaults. Further, the bill indicates service of notice of rescission in the manner described in Section 16.038 is not the exclusive method for rescission, leaving open the possibility of other defenses to statute of limitations claims by borrowers.
Notably, the bill tracks language of Chapter 51 of the Texas Property Code which provides service is complete upon mailing and not actual receipt by the borrower. Cf Tex. Civ. Prac. & Rem. Code § 16.038(c) (Service "is complete when the notice is deposited in the United States mail, postage prepaid and addressed to the debtor at the debtor's last known address.") to Tex. Prop. Code § 51.002(e) ("Service of a notice under this section by certified mail is complete when the notice is deposited in the United States mail, postage prepaid and addressed to the debtor at the debtor's last known address."); see also Lambert v. First Nat'l Bank of Bowie, 993 S.W.2d 833, 835 (Tex. App.—Fort Worth 1999, pet. denied) (debtor's claim that there was no evidence he received notice of default did not raise fact issue regarding service of notice because Section 51.002(e) does not require proof of receipt). An affidavit that service was complete is prima facie evidence of service.
While the bill will not resolve all statute of limitations challenges, it does provide a method for lenders and loan servicers to unequivocally abandon acceleration and may decrease the litigation of abandonment issues.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
