If a mortgage holder delays too long to bring a foreclosure action, the homeowner often may keep the foreclosure from happening — it all depends on what the state of residence says about the statute of limitations (SOL).

A statue of limits starts the clock for taking a legal action, such as beginning foreclosure action. Once the prescribed time has passed, any steps to foreclosure are illegal and home repossession cannot be carried out.

If a significant time passes between the last mortgage payment made and the point when the lender starts foreclosure action, the foreclosure could violate the statute of limitations. Once this happens the homeowner can use the lender’s tardiness, or inattention to detail, as a defense against the foreclosure proceedings.

Usually, the unlawful statute of limitations relevant to homeowners is the one for written contracts. Some states have a separate statute of limitations for foreclosures.
Each state has its limitation statute and they range from three to fifteen years, while most fall inside the three to six year scope.

The statute’s clocks starts when the default occurs, and is normally calculated from the date of the last payment. State statutes of limitation are available online and should be reviewed to determine those the limits for your state.

Stop a Foreclosure

If the lender begins proceedings after the statute of limitations has expired, the lender’s claim becomes invalid. The lender gives up any right to foreclose.

Most lenders have a backlog of delinquent loans. For many of these they have not filed foreclosure with the courts. Months or years could pass between the time the homeowner stops making payments and the foreclosure process begins. That makes it important for homeowners to know the statute of limitations for their state.

The Statue as an Affirmative Defense

This means it is up to the homeowner to raise the issue. If the homeowner doesn’t, the defense is waived and the lender may continue with foreclosure proceedings.

If the SOL runs out during foreclosure, then the statute is not a defense. Even if a foreclosure eats up years to complete, as often happens in New York, it is not a defense.

If the Lender Cancels the Foreclosure

A lender often cancels a foreclosure if they find a procedural error, and refiles the case. If that happens, the homeowner can still use the unlawful foreclosure statute of limitations defense. If the lender goes ahead and begins the case anew, the lender is required to stick to the time period provided by that state’s laws.

Prove Wrongful Foreclosure

If a homeowner waits too long to preserve their home under the SOL provisions, they can still fight foreclosure by proving wrongful foreclosure.

When the debtor can show evidence the lender has failed to work in good faith, the homeowner can:

1.Seek to have the foreclosure dismissed, or
2.Sue the lender for damages

In these type claims, the plaintiff will still have to prove their case. To win compensation, the debtor must prove:

1. A legal debt was owed to the debtor by the lender,
2. The duty was violated in some way,
3. That the break of duty gave rise to damages, and
4. What those were

The Takeaway

Facing a foreclosure? Seek out guidance from a qualified real estate litigation lawyer immediately.