If a homeowner does not pay their mortgage on time, it is possible that the lender could start the foreclosure process. Foreclosure is the legal proceeding by which the lender can take back ownership of a property. However, if the case takes too long to resolve, a statute of limitations may apply. Typically, a case must be open for 5 years or longer before a statute of limitations claim can be made.
The government has changed the terms of loan modification programs many times, and this contributes to the length of foreclosure proceedings. Each time a change occurs, the lender must withdraw a modification offer and create a new one, which can take time.
There is no clear data that shows how many homeowners will be able to keep their homes due to cases not being resolved in a timely manner. However, according to data from Bank of America, up to 90 percent of those who have defaulted on their mortgages are still in their homes 5 years after the foreclosure process has started. If a homeowner is able to convince a judge that a foreclosure case should be dropped due to time, it may mean that the lender may not have any further recourse to take back the property.
Homeowners who are facing foreclosure might wish to talk to a bankruptcy attorney. An attorney may be able to show an individual how bankruptcy could put a stop to foreclosure proceedings through an automatic stay. In some cases, it may be possible to keep a home even after filing for bankruptcy, depending on the circumstances in the case. In the event of Chapter 13 bankruptcy, it may be possible to create a repayment plan that allows a filer to keep their home.
Source: Mortgage Professional America, "How foreclosed owners are getting free homes," March 31, 2015