The COVID-19 epidemic is wreaking havoc on civil court operations across the country, forcing judges to prioritize criminal cases over less pressing civil ones. During the coronavirus pandemic, some courts are tolling—or temporarily suspending—civil statutes of limitations to help reduce case backlog. To find out if your state has enacted such measures, go to your court’s website or look at the Chart: Statutes of Limitations in All 50 States.
What Does It Mean to Have a “Statute of Limitations”?
A “statute of limitations” establishes the time restriction for filing a legal claim, such as a foreclosure action. The action is invalid and can be dismissed if it is filed after a specific date. The length of the statute of limitations varies based on the sort of action or claim at hand. The statutes of limitations for oral contracts, written contracts, personal injury, and property damage, for example, are all different.
Identifying Your State’s Foreclosure Statute of Limitations
The power to enforce a promissory note under the Uniform Commercial Code gives some jurisdictions a six-year statute of limitations for foreclosure (UCC). The statute of limitations for written contracts applies in some cases. On the other hand, other states have a specified foreclosure statute of limitations. The applicable statute of limitations in other areas is the one for enforcing a security interest in land, such as one created by a mortgage or deed of trust. In these states, a lender can foreclose even though the underlying note’s statute of limitations has expired.
As a result, the length of the restrictions period varies significantly between states. Again, some states have six years, while others have a ten-to-twenty-year duration, which could be shorter or longer.
You may frequently find the statute of limitations for a foreclosure in your state by searching through your state’s statutes, which are often available online at the website of your state legislature. However, foreclosure statutes of limitations can be challenging to come by, and how courts interpret and apply them varies. Consult an attorney if you need assistance determining the statute of limitations that applies to your situation.
What Time Does the Statute of Limitations Start Running?
Not only may identifying the length of a statute of limitations be difficult, but defining when it begins can also be challenging. In most cases, the statute of limitations for an unpaid installment starts when the default, such as a missed payment, occurs. Each missing payment is seen by certain courts as a new default, restarting the clock. The statute of limitations for a full loan normally begins to run when the loan is due (on the loan’s maturity date, say 30 years after the first installment is expected). The restrictions period may begin when the lender accelerates the debt after the borrower fails. The entire outstanding sum becomes payable once the loan is accelerated. If the borrower does not pay the debt, the lender can start the foreclosure process. After acceleration, the loan becomes a debt with a single lump-sum payment rather than an installment arrangement.
When Does the Process of Acceleration Begin?
Acceleration occurs when a lender makes an apparent demand for payment of the entire loan balance, stating that if it is not paid, the loan will be accelerated. Before accelerating a loan, many loan terms require the lender to notify the borrower.
(However, if the borrower fails to make a monthly payment, the loan may be immediately accelerated.) If the lender delivers a breach notice before acceleration, the courts are split on whether the notification or the expiration of the notice’s remedy term triggers acceleration. In some circumstances, filing a foreclosure complaint (lawsuit) might speed up the loan process. The timing and notice of acceleration before a foreclosure are governed by state law or government standards.
Again, the law differs by state, so consult an attorney if you need assistance determining when your state’s foreclosure statute of limitations begins to run.
The Limitation Period Is an Affirmative Defense
The statute of limitations is an affirmative defense to foreclosure, meaning that the borrower must raise it during the foreclosure process. This defense must be presented to a judge, which is easier in a judicial foreclosure than in a nonjudicial foreclosure.
If you fail to address the statute of limitations, the defense will be waived, and the lender will be able to proceed with the process.
What Happens If the Statute of Limitations Expires During the Foreclosure Process?
If the statute of limitations expires during the foreclosure, you won’t be able to use it as a defense. So, even if a foreclosure takes years to complete, you won’t be able to use the statute of limitations as a defense to the foreclosure. For example, suppose your lender filed a foreclosure action in June 2021, but the statute of limitations expires in December 2021 while the foreclosure is still proceeding. A statute-of-limitations defense isn’t viable in this case. The lender needs to begin the foreclosure process before the deadline to comply with a statute-of-limitations law.
What Happens If the Foreclosure Case Is Dropped or Cancelled?
You might raise this argument if the lender stops the foreclosure, which could happen if the lender discovers a procedural error or if a court dismisses the suit and then refiles the case after the statute of limitations has passed. If the lender continues the case, it must do so within the statute-of-limitations term if the lender did not cancel its acceleration (also known as “decelerating” the loan).
Consult an attorney.
The regulations governing the statute of limitations and foreclosures are complex and differ from one state to another. If you decide to go this path, you’ll almost certainly need an attorney to examine your capacity to establish a defense based on the statute of limitations and argue it in court. Also, keep in mind that there are numerous potential claims and defenses in any specific foreclosure or legal case. As a result, get legal advice from a local attorney or a legal aid group to investigate all viable defenses in your position.
For information on foreclosure defense call us at (877) 399 2995. We offer litigation document review support, mortgage audit reports, securitization audit reports, affidavit of expert witness notarized, and more.