In 2004, the borrowers obtained a loan from the bank, which also held the deed of trust for this transaction. This deed of trust contained an acceleration clause should the borrowers default on their loan. In 2015, the borrowers defaulted on this loan, and the mortgage servicer issued a notice of intent to accelerate the loan in February of the following year. In October 2016, another notice was sent that rescinded the acceleration that began in February 2016 but also initiated a new loan acceleration. This pattern of rescinding accelerations and commencing new ones immediately after would continue for several years until the borrowers filed suit in August 2020. This suit asserted that the statute of limitations period for the acceleration that had commenced in February 2016 had now expired. Additionally, the borrowers contended that the bank had rescinded earlier accelerations under Texas Civ. Prac. & Remedies Code 16.038 and abandoned acceleration by demanding a value less than the full balance of the loan.
In Moore v. Wells Fargo Bank, No. 23-0525, 2024 WL 735927, 2024 Tex. LEXIS 156, (Feb. 26, 2024) (opinion not yet released for publication), the Supreme Court of Texas found that a lender may simultaneously rescind a prior acceleration and then promptly reaccelerate a loan Under Texas Civ. Prac. & Remedies Code 16.038. Under section (b), a rescission of acceleration “is effective if made by a written notice of a recission or waiver served on each debtor who is obligated to pay the debt.” The bank had complied with this provision by providing the borrowers with multiple written notices of their decision to rescind the earlier loan accelerations and to subsequently reaccelerate this same loan. By doing this, the bank could restore the original maturity date and effectively restore the limitations period. The borrowers unsuccessfully argued that the limitations period did not reset because the letters did not just rescind the loan but simultaneously reaccelerated it. In response, the court explained that the plain text of Section 16.038 does not prevent this dual rescinding and reaccelerating action. Therefore, the written notice to the borrowers of rescinding the acceleration, coupled with a re-acceleration of the loan, reset the limitations period that the bank had to collect on the loan.
By Oleg Perry [email protected]
Edited By Joshua Shetler [email protected]
Edited By Riley Caraway [email protected]