by: Patrick A. Randolph, Jr.
Professor of Law
UMKC School of Law
MORTGAGES; ACCELERATION: Mortgage language authorizing mortgagee to accelerate entire remaining mortgage debt upon mortgagor's default without necessity of further notice or demand for payment is valid. Long Island Savings Bank v. Denkensohn, 635 N.Y.S.2d 683 (App. Div. 1995).
The case does not make clear whether New York statutory law would require notice before acceleration absent a mortgage provision. The common law of some states, such as Texas, imposes a duty of notice but permits waiver. Many other states have statutory requirements that cannot be waived. In the editor's experience, however, most such states also use the more severe non-judicial foreclosure. New York hasn't yet adopted a non-judicial foreclosure statute that practitioners are willing to use, although a new effort to do so now is afoot.
Comment: It is often said that harsh doctrines in law beget broad exceptions in equity. Although many mortgagees try to bargain for "no-notice" defaults, the editor generally advises against this, even from the standpoint of the mortgagee, since it invites dispute and litigation in many cases and creates the possibility of liability for wrongful foreclosure. A brief notice can clarify misunderstandings before they ripen into disputes.
Other lawyers who have appeared on panels with the editor disagree. They contend that a "no-notice" acceleration is necessary to avoid giving a debtor time to gear up for bankruptcy or to hide assets, squander the rents, or otherwise mess up the security when it appears - through the acceleration notice - that the creditor is "getting serious" and is about to foreclose.
The editor would respond first that acceleration should be an early act in the workout negotiation process, not the last act. It tends to bring an air of reality to the discussions, and can always be dissolved if the parties reach some agreement. As to the "bad actors" who will use the notice of acceleration as a pivot point at which they will engage in fraud - the editor believes that they are out there, but that their presence should not justify an overly harsh contract provision in every mortgage note.
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