Banking Law

Is time on homeowners' side? Foreclosure case tossed without prejudice may not pause clock

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Lawyers for homeowners in several states are arguing banks can’t foreclose on their clients’ homes because the statute of limitations has expired.

An issue in the cases is when the clock begins to run and whether a tossed foreclosure case pauses the clock, the New York Times reports.

Lawyers for homeowners say the clock begins to run with a default that causes the bank to claim the mortgage is accelerated and the entire debt is due. These lawyers say the clock that began with acceleration continues to run if a foreclosure case is filed and then dismissed, even if the dismissal is without prejudice. (Banks may still keep a lien on the home, however, that would have to be paid after the house is sold, the story points out.)

Lawyers for the banks, on the other hand, say the clock resets with each missed payment.

In Florida, where the statute of limitations is five years in foreclosure cases, the issue is set to be considered by the state supreme court. The case is Bartram v. U.S. Bank, according to the Daily Business Review (sub. req.) and the National Law Review. Cases based on the issue are also being litigated in New Jersey and New York.

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