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Due to a legal concept called the statute of limitations, some homeowners may be able to keep their homes despite years of missed mortgage payments.
In Florida, one homeowner may have beaten her foreclosure because the case against her was dismissed by the court. Since the statute of limitation on foreclosing her home has passed, the bank cannot refile its claim against her.
Sounds too good to be true? Here is what you need to know about foreclosures and the statute of limitations:
What Is a Statute of Limitation?
A statute of limitations is a time limit, set by law, on when you can bring a lawsuit for some kind of legal wrong. For instance, Michael stole your unicorn in January, 2012. In your state, the statute of limitations for conversion (when one person interferes with the ownership rights of another) is one year. This means you have until January, 2013 to file a lawsuit against Michael. Three years pass, and you haven't filed any lawsuit yet. Michael gets to keep the unicorn now, because you are time barred from filing a suit.
What's The Statute of Limitation for Foreclosures?
Each state sets its own laws regarding statutes of limitations. Since foreclosures are claims for breach of contract, your state's statute of limitation for written contracts usually apply. In New York, the statute of limitation is six years. In Florida, it is five years. In California, the statute of limitations for breach of a written contract is four years, and two years for an oral contract.
When Does It Start?
Figuring out the length of a statute of limitation is easy. Figuring out when it starts is the hard part.
Usually, the statute of limitation starts when the wrong happened. In the case of foreclosures, lawyers for homeowners argue that the statute of limitations starts when the homeowner defaults, and the mortgage is "accelerated." The banks, instead, argue that the statute of limitation starts over every time homeowners misses a payment.
In the case of Deutsche Bank v. Beauvais, the court ruled that the statute of limitation starts when the mortgage is accelerated.
Does It Apply In My Case?
If the bank does not file a foreclosure lawsuit against you within the statute of limitations, then you are safe.
However, if the lawsuit starts before the end of a statute of limitations, then it does not matter how long the lawsuit lasts. For example. the statute of limitations in your state is five years. The bank files a foreclosure suit against you in 2001, two years after you defaulted. The lawsuit drags on to 2007. Even though the statute of limitations ended in 2004, this does not end your foreclosure case.
But, if the judge dismisses the foreclosure for some technical reason. The bank cannot refile another lawsuit because the statute of limitation has passed.
However, the statute of limitations on foreclosures only apply in states, like New Jersey, that require lenders to file suit to foreclose, also known as judicial foreclosures. In California, the four year statute of limitations only applies to judicial foreclosures, and not to non-judicial foreclosures. Judicial foreclosures are rare in California.
If you are dealing with a foreclosure or facing a possible foreclosure, an experienced foreclosure attorney may be able to help.