How Long Does a Lender Really Have to File for Foreclosure?

As any person involved in the real estate industry is well aware, there were hundreds (if not thousands) of foreclosure cases filed in 2007 and 2008 which were dismissed due to improper documentation or non-compliance with Florida’s foreclosure statutes.  Recently, many lenders have been re-filing these previously dismissed cases with better legal counsel or more complete documentation.  With this influx of new cases, we have received many inquiries from homeowners asking if the bank has waited too long to file for foreclosure.  The answer to this question is more complex than most people realize.

The statute of limitations to file a foreclosure suit in Florida is five (5) years.  This seems pretty straightforward.  However, the controversy stems from when the five year period begins to run.  A common misconception is that this five year time frame begins on the date the homeowner stops making payments.  That is not the case.  In Florida, the statute of limitations begins to run on either (1) the date the last payment is due under the loan, or (2) the date the bank accelerates the balance due under the note.  When a note goes into default, the lender must accelerate the loan balance (i.e. call the entire amount due that would have been paid over the full term of the mortgage) before it can foreclose.  Typically, once a loan becomes significantly delinquent, a lender or a lender’s attorney will send a letter to the homeowner stating that the loan balance has been accelerated and demanding payment for the full amount of the loan.  The date of acceleration is when the clock begins ticking for the lender to file a suit to foreclose.   

However, based on a new decision from a Florida appellate court, the lender does not just have one chance to accelerate.  According to this case, each default under a loan creates a new cause of action, and thus a new chance for the bank to accelerate the loan.  In this case, a lender filed a foreclosure action that was dismissed by the court.  More than five years after the foreclosure action was dismissed, the homeowner requested the court to cancel the note and mortgage because the bank failed to re-file its foreclosure action within the five year statute of limitations.  The trial court agreed and cancelled the mortgage.  However, the appellate court overturned the trial court’s decision, holding that each payment the homeowner failed to make after the foreclosure was dismissed created a new event of default which entitled the lender to accelerate the loan. This new case essentially holds that a lender has five years from the date the last payment is due under a mortgage to file a foreclosure suit.  Therefore, if the homeowner stops making payments on a 30 year loan after 5 years, the lender could feasibly have 35 years to bring a foreclosure action.  This is a significant ruling, and the controversy over this issue will likely end up being resolved by the Florida Supreme Court.

Another common misconception is that the bank has five years to complete the foreclosure process.  In fact, the bank has five years to commence the foreclosure process, i.e. file suit.  Thus, if it takes a bank ten years to obtain a foreclosure judgment, the foreclosure is not barred as long as the lawsuit was initially filed within the five year statute of limitations.

In conclusion, the likelihood of a homeowner obtaining a home for “free” based on the statute of limitation theory is fairly slim, and any opinion regarding whether the statute of limitations has been tolled should be carefully evaluated by an attorney.


Berlin-Patten, PLLC

This communication is not intended to establish an attorney client relationship, and to the extent anything contained herein could be construed as legal advice or guidance, you are strongly encouraged to consult with your own attorney before relying upon any information contained herein.

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