Consumer Finance Regulatory

Locke Lord QuickStudy: Newly-Enacted Texas Law Confirms Mechanism for Lenders to Unilaterally Rescind Acceleration

Locke Lord LLP
June 23, 2015

On June 17, 2015, Governor Greg Abbott signed House Bill 2067, which amends the Texas Civil Practice and Remedies Code to provide a clear mechanism for lenders to unilaterally rescind acceleration of a defaulted loan.

Why does HB 2067 matter?
Because lenders are increasingly facing claims that their liens are unenforceable under the statute of limitations. Under Texas law, a lender has four years from the date of acceleration to either (1) bring an action for judicial foreclosure, or (2) complete a nonjudicial foreclosure sale. Given the increasing amount of loss mitigation attempts, servicer transfers, and other unforeseen circumstances, lenders sometimes do not pursue foreclosure within four years of acceleration. Before HB 2067 was signed into law, lenders were forced to argue that an acceleration was abandoned under various common law principles. HB 2067 clearly establishes that lenders may unilaterally rescind acceleration simply by providing notice to the debtor of its intention to rescind acceleration.

How does HB 2067 work?
HB 2067 establishes that a rescission of acceleration is effective if made by written notice served by the lienholder, the servicer of the debt, or an attorney representing the lienholder on each debtor. The Bill requires service of the written notice to be by first-class or certified mail and establishes that service is complete when the notice is deposited in the U.S. mail, postage prepaid and addressed to the debtor at the debtor’s last known address. A notice of rescission does not affect a lienholder’s right to accelerate the maturity date of the debt in the future or waive past defaults.

Does HB 2067 establish the exclusive method for rescinding acceleration?
No. The Bill expressly does not create an exclusive method for rescission of acceleration. Common law abandonment principles remain.

When does HB 2067 become effective?
It is already effective. HB 2067 applies to all promissory notes accelerated before, on, or after June 17, 2015, as well as all notices of rescission served before, on, or after June 17, 2015.

For more information on the matters discussed in this Locke Lord QuickStudy, please contact the authors.