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The subprime mortgage crises of 2008, which experts believe caused millions of mortgages to default, may be old news but mortgage lenders holding defaulted mortgages are starting to feel the effects and may now face a new problem which can result in the loss of the security interest. Nearly a decade after the 2008 Financial Crisis, considered the worst since the Great Depression, crippled the American economy, mortgage lenders are bringing an increasing number of foreclosure actions, but borrowers are now raising the statute of limitations as a defense. In some instances, borrowers are actually initiating actions in an effort to have courts declare mortgages invalid, thereby redefining the meaning of a “free lunch.”

Mortgage lenders responded to the subprime mortgage crises, but the response was not always the initiating of a foreclosure proceeding to gain possession of the collateral securing the loan. For example, mortgage lenders may have accelerated a mortgage upon default. Acceleration of the mortgage loan, however, may have triggered the running of the statute of limitations while offering very little benefit to the mortgage lender. In other instances, foreclosure litigations may have been initiated but not litigated to conclusion. In such circumstances, the loan could have been sold, a common occurrence, and the subsequent holders of the mortgages may have opted not to proceed. In other instances, mortgage lenders may have opted not to proceed with foreclosure litigations because of some type of deficiency (or a perceived deficiency), thereby opting to voluntarily dismiss the action. Such actions may have not stopped the running of the statute of limitation.

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