By: Amanda L. Krenson, Attorney

Since the Federal Housing Finance Agency (FHFA), the United States Department of Housing and Urban Development (HUD), the United States Veteran’s Administration (VA) and the United States Department of Agriculture – Rural Housing (USDA)  imposed moratoriums on foreclosures,  states have likewise followed suit and issued moratoriums on commencement of new foreclosure actions.

For loans accelerated prior to when the first series of federal-backed loans went into moratorium, loan servicers should not assume that the statute of limitations automatically tolls on each loan. In fact, tolling is controlled by state law, and in some cases, the state-level statutes combined with executive orders left the issue less clear than desirable. Thus, it is very important that loan servicers review their loan portfolios to determine if it is possible that a loan’s statute of limitations period expired on or after March 12, 2020 in order to either de-accelerate the loan and/or prepare for possible legal defenses to the expiration of the statute of limitations during this crisis.

At Reisenfeld & Associates, we serve loan servicers in four states – Ohio, Kentucky, Indiana, and West Virginia.  In general, each of these states has a statutory provision or rule providing that the Statute of Limitations for enforcing the terms of a note (in personam judgment) is six (6) years.  Outside of enforcing the note, each states’ statutes and/or rules vary as to the enforcement of the mortgage, and even further vary as to when it must be enforced either based on the note maturing or on default under some provision of the mortgage. As such, it is very important that you seek legal counsel should you have a concern about enforcing any of these instruments that you may believe had the statute of limitations expire during the Covid-19 crisis.

For ease of reference, below is a chart capturing a general summary of each state’s position concerning relevant statute of limitations for servicers. It does not capture, however, important details as to what causes the action to accrue as that is a fact-sensitive inquiry often better made on a case-by-case basis.  For example, in Indiana the date of acceleration, not the date of the last payment, is the date of accrual.  In contrast, in Ohio if no acceleration occurs, the date of the last payment may serve as the cause of accrual and give the servicer another four years after default to file its claim.  Loan servicers should seek legal counsel to help analyze any loans that may be impacted prior to filing a lawsuit.

 Statute of Limitation on NotesStatute of Limitation on MortgagesDoes the State have a Statute that tolls for an injunctive prohibition (e.g. Governor’s Order) on filing?Does the State Law prohibit De-acceleration?
IN6 years after acceleration.10 years after date of default.No. There is a state supreme court order tolling under Admin. Rule 17, through dates that have been extended to August 14, 2020, and subject to further extension. No legislative action was taken.No, however, it is advisable to seek agreement with the borrower (e.g. loan modification).
KY6 years after acceleration.No statute or case law, so presume 6 years after default although there is arguably a concession in the law for up to 15 years.Yes. KRS § 413.260.No, however, it is advisable to seek agreement with the borrower (e.g. loan modification).
OH6 years after acceleration, 10 years after last payment.8 years after acceleration.Yes, there was enabling legislation (HB 197) passed in response to Covid-19 crisis. Tolling only applies to suits with a statute of limitations expiring March 9, 2020 through July 30, 2020, or the date that the state of emergency terminates, whichever date is sooner. There is an accompanying state supreme court administrative order providing for tolling.No, however, it is advisable to seek agreement with the borrower (e.g. loan modification).
WV6 years.5 years after date of maturity or 35 years from date of deed of trust if no maturity date stated.Based on WV Supreme Court of Appeals Administrative Order entered on May 6, 2020, any statutes of limitation that would have expired between March 23 and May 15 were extended to May 18, 2020.  No, however, it is advisable to seek agreement with the borrower (e.g. loan modification).

In those states where there is no statute providing for tolling during an injunctive prohibition (e.g. state executive orders tolling statutes of limitation), loan servicers should be acutely aware that there is no automatic right to tolling the period of time and additional steps should be taken to protect the investor.  Servicers may, before filing for foreclosure, consider de-accelerating the debt in cooperation with the borrower via a forbearance or loan modification plan.  Another alternative is that loan services ensure that their legal counsel reviews and responds to any affirmative defenses or motions to dismiss raised by the borrower by pleading in response the affirmative defense of equitable tolling. 

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