Fla.’s foreclosed owners find way to ‘free’ home?

04/02/2015

Fla.’s foreclosed owners find way to ‘free’ home?

TALLAHASSEE, Fla. – April 1, 2015 – Some foreclosed homeowners are finding a way to keep their home mortgage-free by taking advantage of their state's statute of limitations with foreclosures.

States that must approve foreclosures in court before they become final are facing huge backlogs in the court system, which has caused some foreclosures to drag on for years. When these cases get dragged out five years or more, some homeowners are citing the state's statutes of limitations as the reason why lenders can't take possession of the home now. They can then continue to live in the home, without ever paying another dime to their mortgage.

States like Florida, New Jersey, and New York are seeing some of the largest numbers of these cases.

There is no housing data for just how many foreclosed homeowners may be able to skirt the law in this way. But many defaulting homeowners do continue to live in their homes long after the foreclosure process has begun. For example, Bank of America alone has started the foreclosure process on about 20,000 mortgages that have not been paid in at least five years – 90 percent of those homes are still occupied too.

Lawyers in Florida argue that lenders have five years to file for foreclosure after a homeowner defaults. Banks argue they have more time than that to file for foreclosure and argue that the five-year clock resets every time a homeowner misses a monthly payment. So far, some Florida judges have sided with lenders, but the issue is still being argued in courts.

"The statute of limitations does not halt a foreclosure case that is continuing in court," The New York Times reports. "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 Florida Supreme Court is now deciding the issue.

In New Jersey, the statute of limitations on foreclosures is six years, and the issue of making sure some foreclosures don't fall through the cracks is also being argued in courts. A bankruptcy judge reluctantly in November allowed a Madison, N.J., man to walk away from a $520,000 mortgage that had been in default since 2007. The lender has appealed.

New York courts are also considering the statute of limitations.

"It's becoming a more common way to get out from under these cases," Linda Tirelli, a lawyer in White Plains who represents homeowners facing foreclosure, told The New York Times.

Source: "Foreclosure to Home Free, as 5-Year Clock Expires," The New York Times (March 29, 2015)

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