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Arkansas Court of Appeals Holds Statute of Limitation Bars Foreclosure Five (5) Years After Acceleration Unless There Is Clear Intent to Abandon the Acceleration
On September 9. 2020, in the case of Ocwen Loan Servicing, LLC v. Oden, 2020 Ark. App. 384, The Arkansas Court of Appeals clarified what is needed to abandon a prior acceleration of a loan for purposes of the statute of limitations. The Court held that the servicer must show a clear intent to abandon a prior acceleration to prevent the expiration of the limitation period.
In Oden, the borrower’s last payment was made in November 2010, and the servicer declared a default on December 2, 2010. The servicer then sent a Notice of Acceleration on March 17, 2011, after which two different non-judicial foreclosures were started then canceled. In 2015 and 2016, eight (8) separate “Delinquency Notices” were sent to the borrows that stated the number of days since the date the loan had become delinquent and the total amount necessary to bring the loan current. In 2017, the borrowers filed a declaratory judgment action claiming that foreclosure was barred by Arkansas’ five (5) year statute of limitations.
The borrower noted that since loan first became delinquent on December 2, 2010, and was accelerated on March 17, 2011, the servicer’s action to enforce the loan after March 17, 2016 was barred by the statute of limitations. Conversely, the servicer argued that it “abandoned the acceleration” by attempting to collect less than the accelerated amount of the debt when it sent the delinquency notices that contained reinstatement figures.
The trial court held that the Note was an installment contract with an optional acceleration clause and that the limitations period begins to run when the note is accelerated. The trial court specifically stated that there is no “abandonment exception” in the statute of limitations.
On appeal, the Arkansas Court of Appeal affirmed the trial court and stated: “Ocwen never expressly informed the Odens that the acceleration had been abandoned. Therefore, there was “no clear intent to abandon the acceleration.” The Court further held that absent “evidence of abandonment or a contrary agreement between the parties,” a clear and unequivocal notice of acceleration conclusively establishes the date of accrual from which the limitations period begins to run.
As of result of this clarification of Arkansas law, servicers should be mindful of bringing a foreclosure action prior to five (5) years from the date of acceleration. Moreover, if a servicer intends to “abandon the acceleration” or “decelerate,” it should say so very clearly in a letter to the borrower before the initial five (5) year period expires.
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