A common procedural defense to a lender’s attempt to foreclose on a home involves the statute of limitations. This governs the time in which a lender can pursue a foreclosure after the homeowner stops making payments on their mortgage. If the lender violates the statute of limitations, the foreclosure action can be dismissed on that basis alone, even if the foreclosure otherwise would be valid. A state may have a specific statute of limitations for a foreclosure action, or it may be controlled by the statute of limitations for written contracts, since a mortgage is a type of contract. The statute of limitations lasts between three and six years in most states, although a few states have a longer time period.
The statute of limitations starts running when the homeowner stops making payments. This could mean that it starts when the homeowner makes the last payment before stopping or when the homeowner first misses a payment on the mortgage. Often, a lender will not take action immediately to pursue a homeowner for missing a payment on a loan. Since they handle a huge quantity of loans, they may not start the foreclosure process for years after the first missed payment. As a result, the statute of limitations can be especially relevant to a foreclosure case.
Raising the Statute of Limitations Defense
As the homeowner, you have the responsibility to raise the statute of limitations defense if it applies. The court will not review this issue on its own account. If you do not raise the defense, it will be considered waived, even if the lender violated the statute of limitations. The case will proceed forward on its merits unless you have other procedural defenses.
Some people may wonder whether delaying the foreclosure proceeding on other grounds can eventually trigger a statute of limitations defense. In some states, a foreclosure lawsuit may take years to resolve. However, the statute of limitations refers only to the time period before the lender starts the action. If it runs out while the litigation is still in progress, you cannot raise it as a valid defense.
On the other hand, you may be able to raise the statute of limitations as a valid defense if this is not the first time that the lender has sought a foreclosure. Sometimes a court will dismiss a case “without prejudice” if a homeowner correctly points out a procedural error by the lender. Or a lender may voluntarily ask for a case to be dismissed without prejudice if it notices an error. This allows the lender to start over with the case from the beginning. However, the lender must refile within the statute of limitations. Repeated dismissals without prejudice thus can result in the permanent defeat of a foreclosure action if enough time passes.
Restarting the Statute of Limitations
Certain actions by the homeowner can restart the statute of limitations. You may want to be careful in your interactions with the lender if you are hoping to use this defense. For example, if you make a payment under the mortgage, this may restart the statute of limitations. The lender would then have additional time to pursue a foreclosure if you stop making payments again.