In Miami, Florida, The New York Times reports:
- In September, Susan Rodolfi celebrated an unusual anniversary: five years of missed mortgage payments.
She is like a ghost of the housing market’s painful past, one of thousands of Americans who have skipped years of mortgage payments and are still living in their homes.
Now a legal quirk could bring a surreal ending to her foreclosure case and many others around the country: They may get to keep their homes without ever having to pay another dime.
The reason, lawyers for homeowners argue, is that the cases have dragged on too long.
There are tens of thousands of homeowners who have missed more than five years of mortgage payments, many of them clustered in states like Florida, New Jersey and New York, where lenders must get judges to sign off on foreclosures.
Wanda Darden, at home in Riverdale, Md. Her mortgage has bounced among three loan servicers, leading to increasing mix-ups. “I either get conflicting answers or no answer at all,” she said.
However, in a growing number of foreclosure cases filed when home prices collapsed during the financial crisis, lenders may never be able to seize the homes because the state statutes of limitations have been exceeded, according to interviews with housing lawyers and a review of state and federal court decisions.***
[T]he laws in places like Florida could prove to be a wild card. In a state where “hanging chads” helped decide the 2000 presidential election, a legal technicality could help settle the state’s foreclosure crisis.
Lawyers for homeowners in Florida contend that lenders have five years to file for foreclosure after a homeowner defaults, normally after several months of missed payments, and the mortgage is “accelerated,” meaning that the bank says that the debt is due all at once. Banks say they have many more years to file for foreclosure, arguing that the five-year clock resets every time a homeowner misses a monthly payment — regardless of when the mortgage was accelerated. Some Florida judges have agreed.(1)
The statute of limitations does not halt a foreclosure case that is continuing in court. But in some Florida courts, homeowners’ lawyers have argued that once a foreclosure is dismissed even for technical reasons, the lender cannot refile a new foreclosure to seize the home if the statute of limitations has passed. Still, the lender has some recourse: It can keep a lien on the house that must be paid off if the property is ever sold.
The issue is now before the Florida Supreme Court.
Thanks to Deontos for the heads-up on this story.
(1) In an analogous case, involving the application of the statute of limitations when challenging (on unconscionability grounds) an escalation clause in a 99-year ground/land lease that became enforceable every five years, a Florida appeals court held that the statute of limitations for commencing such a challenge began at the time of the first escalation, and that the statute of limitations does not reset each time the escalation clause became effective (ie. every five years). See Garden Isles Apartments No. 3, Inc. v. Connolly, 546 So.2d 38 (Fla. 4th DCA 1989):
- The subject escalation clauses were first enforced in 1975 and 1976 respectively. Contrary to appellants' argument that a new cause of action arose each time a new five-year escalation clause became effective, we hold that the cause of action in this case accrued at the time of the first escalation and that the complaint filed in 1986 was well beyond the applicable five-year statute of limitation periods which commenced in 1975 and 1976.