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Keep your home after foreclosure -- with no mortgage?!

In the past, we have discussed the huge backlog of foreclosure cases in Florida’s courts, and the creation of “foreclosure court” to try to deal with the problem. Florida law requires a judge to approve a lender’s seizure of a home, which is one reason for the delays in resolving foreclosure here.

In some cases, foreclosure cases linger in court for years, causing a great deal of fear and uncertainty for homeowners. But if they wait long enough, The New York Times reports, they may get to keep their home -- without a mortgage hanging over their heads.

The statute of limitations is the reason for this surprising result. As in most legal matters, the law has a time limit on when banks can file for foreclosure. In Florida, the statute of limitations for foreclosure is five years.

Many observers say that the statute of limitations starts ticking when a homeowner defaults on their mortgage, usually after falling several months behind on payments, and the bank reacts by accelerating the mortgage. This means the bank is asking for the balance of the debt all at once, which few struggling homeowners can pay.

This usually leads to a foreclosure filing well within the five-year time limit. But when a case drags on for long enough before getting dismissed, some Florida judges have ruled, it is too late for the bank to refile.

What happens next is not clear. It appears the homeowner gets to keep the house, but may not be able to sell it, in practical terms; the lender may have a lien on the property that must be paid off at sale.

Naturally, banks object to this outcome, and the matter is currently before the Florida Supreme Court. So the law regarding long-gestating foreclosures could soon change.

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