Extended Foreclosure May Result in Lender’s Loss and Borrower’s Gain

For years many lenders have started foreclosure actions but have failed to conclude the legal matter. Some foreclosure defense attorneys are using the statute of limitations as a defense for which six years may have elapsed since the mortgage lender has declared the loan immediately due and payable, also known as acceleration.

The New York Law Journal reports in a recent article that there are 92,000 pending foreclosures in New York and an unknown number of cases may fall into this potential situation where the banks’ foreclosure claims would be time-barred as a result of their tardiness. However, even if the bank can’t foreclose, they still have a lien on the property. The homeowner, if successful with this defense, would have the right to live there without fear of being thrown out, but would have to square up with the bank if they ever refinanced or decided to sell the property. That would be quite a conundrum.

In one Suffolk County case, the judge dismissed the foreclosure case because the bank unduly and unreasonably delayed in pursuing the matter. It is being appealed by the lender. The simplest solution would be for the banks to offer loan modifications at the outset or speedily go through the foreclosure process to obtain title or sell the property at an auction sale. Maybe the thought of losing the ability to foreclosure will spur the banks to make more timely decisions along the way.

If you are contemplating bankruptcy as a result of credit card debts, medical bills, taxes, or mortgage arrears, consult an experienced Bronx/Westchester attorney.