The 5th Circuit Court of Appeals recently dealt another blow to homeowners by ruling that a bank’s 4-year foreclosure statute of limitations is a moving goal post.

In almost every other area of Texas law, the foreclosure statute of limitations is a strict deadline with almost no exceptions. Get your lawsuit filed in time or else you lose your rights. If you or I enter into a contract and someone breaches it, we have to file suit within four years of the breach. If we don’t, we lose our rights FOREVER.

Mortgage banks once again have a Court create a different rule for them. If they get close to the 4 year mark, they can just reset their own clock. In other words, the bank can start the timer. Stop it. Reset it. Start it….

Foreclosure Statute of Limitations Time Clock Resets

In Borens v. U.S. National Bank Association (US Bank), the homeowners contend that US Bank lost its right to foreclose their property as more than 4 years elapsed from the first acceleration notice until the bank’s latest foreclosure attempt. Acceleration is the bank’s demand for the entire balance due to a default.  US Bank argued that the subsequent notices of default rescinded the initial acceleration. In other words the 4 year clock stopped ticking and restarted because their letters gave the homeowner another chance.  It’s important to note that the homeowners never made a subsequent payment after the initial acceleration.

The 5th Circuit Court of Appeals is supposed to follow Texas state law. Although it’s a federal court, it must apply Texas statutes and cases decided in state courts. That begs the question….What does Texas law say regarding this issue? You guessed it! Texas was silent on the issue. So what did the 5th Circuit Court of Appeals do? Instead of certifying the question to the Texas Supreme Court (the process by which the Federal Court simply asks the Texas Supreme Court to answer the question for them so they can enforce it) It took a GUESS! Not exaggerating. Not one bit. Read page 7 of the opinion below!  As is almost always the case with the 5th Circuit decisions regarding mortgages, the bank can do no wrong. Banks win. Homeowners lose. The Court held that after acceleration, the banks simple request for the arrears to be paid can restart the clock. No activity is required by the Homeowner.

Does this mean the Texas Courts of Appeal will agree? Not necessarily but it’s not looking good.   Sounds like a good issue for Guerra | Days to take up! Stay tuned while we look for a model case!  If you know of any, please let us know immediately.