by K.K. MacKinstry
Last week a Manhattan court ruled in Costa v. Deutsche Bank that Deutsche Bank had failed to foreclose within the six year window and was therefore barred from collecting the debt. In the same week, the Florida Supreme Court denied a motion for rehearing in Bartram v. U.S. Bank regarding the statute of limitations in foreclosure cases, therefore ruling that there is no statute of limitation on mortgage debt in Florida.
In the 2016 Bartram opinion the court ruled that if there is an involuntary dismissal of a foreclosure in a foreclosure case, a follow-up foreclosure action can be filed. This decision allows a lender to “correct” issues in litigation and refile until they can successfully foreclose on a homeowner and is likely unconstitutional. Bartram ruled that a follow-up filing could be done to accelerate the debt involved in a mortgage foreclosure again and again.
The decision is an especially important one for lending institutions in Florida who fought tooth and nail for the decision. Banks are allowed to file foreclosure even in circumstances when previous foreclosure actions have been attempted. For exampl,e if a bank loses because they came to court with an unendorsed note, this decision tells the bank exactly what issue to cure before they file to foreclose again. The banks have deep pockets and can file an unlimited number of lawsuits, while the homeowner will be forced to defend against foreclosure again and again until the bank can successfully foreclose.
This ruling affects all Floridians. There is no other state in America where a bank receives a second, third, fourth, fifth or sixth time (or more) to successfully foreclose. In theory, a homeowner could spend decades in litigation before the bank finally wears them down or bankrupts them while defending their home.
Statute of limitations are important in debt collection because people should not be pursued for decades of their lives- especially by a bank that can’t prove standing without forging and fabricating documents to “perfect” its illusion of being a holder.
This is likely a final decision and a terrible decision at that. The Florida Supreme Court is no longer bothering to hide its bias for the banks.
A statute of limitations sets a time limit for initiating a legal claim. In the context of home foreclosure, the statute of limitations for written contracts (that is, mortgages) is usually the applicable statute or there may be a specific statute that addresses foreclosures, as is the case in New Jersey. If the foreclosure is initiated after the statute of limitations has expired, the lender’s claim is invalid and the lender is not entitled to foreclose.
Raising the Statute of Limitations as a Defense to Foreclosure
If the relevant time period for a foreclosure statute of limitations has run out, then this is an affirmative defense to foreclosure. The statute of limitations defense must be asserted by the homeowners to defeat the lender’s claim. If the homeowners do not assert the statute of limitations defense, then this defense is deemed waived. Therefore, it is extremely important for borrowers to be aware of the statute of limitations for foreclosures in their state because it could mean a quick end to a foreclosure if the time limit has expired.
On the other hand, if the statute of limitations runs out after the foreclosure process has already started, then the statute of limitations will not be a defense to the foreclosure. This means that even if a foreclosure takes years to complete and the time period under the statute of limitations covering foreclosures runs out while the foreclosure is in process, this will not prevent the foreclosure from going through. For instance, if the lender files a foreclosure lawsuit in January, 2017, but the statute of limitations runs out in June, 2017 while the foreclosure is pending, a statute of limitations defense is not available. In order to comply with a statute of limitations, the lender must simply begin the foreclosure before the time period expires.
However, in most states, if the foreclosure is cancelled or dismissed (perhaps due to a procedural error by the lender), then the statute of limitations will still apply to any subsequent foreclosure. The lender could restart the foreclosure, but the restart would have to occur within the time period provided for in the statute of limitations. In the example above, if the foreclosure was dismissed in April, 2017, the lender would need to restart the action prior to June, 2017 to fall within the statute of limitations. It is important to note that if the borrower makes a payment in the interim, this will reset a statute of limitations in most cases.
How to Determine the Statute of Limitations in Your State
Each state has its own set of statutes of limitations. Generally, for a written contract, including mortgages, the statute of limitations will vary from three years to 15 years, though this differs from state to state with most falling within the three-to-six-year range. Most states have a statute of limitations of six years covering foreclosures.
The statute of limitations clock for a mortgage foreclosure usually starts when the default occurs–that is, when the borrowers stop making mortgage payments. It is usually calculated from the date of the last payment or from the due date of the first missed mortgage payment. Again, this depends on your state’s particular statute. If you have the misfortune of living in Florida, every time you miss a payment, the statute of limitations begins all over again.