If there is a significant time lapse between when you stop making mortgage payments and when the lender initiates a foreclosure, the foreclosure might violate the statute of limitations. If this happens, you can use this as a defense to the foreclosure. Read on to learn what a statute of limitations is and how it can be used to protect you from foreclosure.
To learn about foreclosure, the events leading up to it, and typical foreclosure procedures, see our Foreclosure Basics topic.
What is a Statute of Limitations?
A statute of limitations sets the time limit for bringing a legal claim, like initiating a foreclosure action. If the case is filed after a certain date, it is not valid and can be dismissed. The time limit varies depending on the type of action or claim that is involved. There are different statutes of limitations for oral contracts, written contracts, personal injury, and fraud. (Get more information about the statute of limitations.)
Determining the Statute of Limitations in Your State
Generally, the statute of limitations that is relevant to home foreclosures is the one for written contracts. However, some states (for example, New Jersey) have a specific statute of limitations for foreclosure.
Each state has its own statute of limitations, which ranges from three years to 15 years. Most states fall within the three to six year range. To determine the statute of limitations in your state, look in your state’s statutes. These are often available online at your state’s legislature webpage. (To learn how to check your state statutes, visit Nolo's Laws and Legal Research Center. You can find your state's statute of limitations for written contracts in our Chart: Statutes of Limitations in All 50 States.)
When Does the Clock Start Running for the Statute of Limitations?
The statute of limitations clock for a mortgage foreclosure usually starts when the default occurred. (The “default” is, for example, when you stopped 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.
To learn more, see When Does the Clock Start Ticking for the Statute of Limitations?
Stopping a Foreclosure
If the foreclosure starts foreclosure proceedings after the statute of limitations has expired, the lender’s claim is invalid and the lender is not entitled to foreclose.
The Statute of Limitations Is an Affirmative Defense
The statute of limitations is an affirmative defense to foreclosure. This means it is the homeowner's duty to raise the issue in the foreclosure. If the homeowner does not raise the statute of limitations defense, then the defense is waived and the lender can continue with the foreclosure.
What If the Statute of Limitations Runs Out During the Foreclosure?
If the statute of limitations runs out during the foreclosure, then it is not a defense to the foreclosure. This means that even if a foreclosure takes years to complete, which often occurs in some states like New York where the average foreclosure takes about three years, it is not a defense to the foreclosure.
Example. Say your lender files a foreclosure lawsuit in June 2012, but the statute of limitations runs out in December 2012 while the foreclosure is pending. In this scenario, a statute of limitations defense is not available. To be in compliance with a statute of limitations, the lender only needs to start the foreclosure before the time limit expires.
What If the Lender Cancels or Dismisses the Foreclosure?
If the lender stops the foreclosure action, which often happens if the lender discovers a procedural error, and then refiles the case, the homeowner can use the statute of limitations defense. If the lender restarts the case, it must do so within the time period provided by the statute of limitations.
Example. In the example above, if the lender dismisses the foreclosure in October 2012, the lender would need to restart the foreclosure prior to December 2012 to meet the statute of limitations. However, if the homeowner were to you make a payment in the interim, this will usually reset the statute of limitations.
The Statute of Limitations in the Current Real Estate Market
Most lenders currently have a backlog of delinquent loans for which they have not yet filed foreclosure actions. It may be months or even years between the time that the borrower stops making payments and the lender initiates the foreclosure process. This means that it's important for borrowers to be aware of the statute of limitations for their particular state. It may become a valid defense in a foreclosure action