Can downstream creditors collect deficiency judgments on mortgage loans a decade or more after the foreclosure?

The question in the case, Santos v. Yellowfin Loan Servicing Corp., No. 22-0910 (Tex. S. Ct.),  is whether a claim to collect a deficiency judgment on a second mortgage accrues when that judgment is entered or whenever in the future the lender (or its successor in interest) decides to “accelerate” the original mortgage loan.

Lenders in Texas have been selling their interests in deficiency judgments on long-ago-foreclosed mortgages to others who than sue to collect the deficiency a decade or more after the foreclosure (and after the creation of the deficiency). Lower Texas courts have been holding that these suits are timely, saying that the claim does not accrue until the downstream owner of the claim “accelerates” the underlying note (which means, effectively, whenever that person wants to sue). A client represented by the Appellate Courts Immersion Clinic (ACIC) says, no, the claim accrues at the time of the deficiency judgment. ACIC recently petitioned the Texas Supreme Court, arguing that the lower courts are not focusing on the correct statute of limitations and misconstruing the underlying transaction, leading to harsh results for people who reasonably believed that the pernicious effects of their old predatory mortgage loans were behind them. Read ACIC’s petition here.

In hopeful news, the Texas Supreme Court has recently demanded a response from the (purported) creditor.


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