Statute of Limitations Bars Suit Against Home Lender Which Foreclosed

In a recent case against their former real estate lender, two New Mexico residents failed in District Court to successfully bring claims against that lender because they waited too long to file their case. These homeowners alleged that, in March 2007 when they signed their loan documents with Countryside Home Loans (“Countrywide”) securing funds to buy their house, Countrywide fraudulently and/or negligently made misrepresentations to the borrowers concerning their own ability to afford a loan of that size. While the United States District Court relied on the plaintiffs’ failure to meet the statute of limitations as reasons for dismissing the case, it also noted that the plaintiffs had the opportunity before closing on the home to review loan disclosures which would have shown that the Countrywide was misstating their income. 

The Plaintiffs had already vacated their home after Codefendant BAC Home Loans Servicing, LP (BAC), the loan servicer, initiated a foreclosure action against Plaintiffs. Although the Plaintiffs did not have notice of the foreclosure proceeding, they agreed, after some negotiation to leave the premises by May 28, 2010. 

When they turned around and sued Countrywide and the other codefendants on January 9, 2014, they brought these four basic claims which each have a four-year statute of limitations:

1. Fraudulent Inducement to Obtain a Mortgage Loan financed by Defendants

2. Negligent Inducement to Obtain a Mortgage Loan financed by Defendants

3. Violation of the New Mexico Home Loan Protection Act (HLPA), a statute which requires creditors to document and consider a borrower’s “reasonable ability to repay” prior to offering the borrower a home loan.

4. Violation of the New Mexico Unfair Practices Act (UPA) that is derived from Plaintiffs’ HLPA claim 

The Plaintiffs argued that the statute on each claim should not start to run until they actually discovered that the Defendants had acted fraudulently. But the federal District Court in Laurenzana v. Countrywide KB Home Loans,  No. 1:14-cv-159-JAP/KBM (US Dist. Ct. N.M. 2014) rejected that argument finding the statute starts to run when the Plaintiffs “could have discovered the fraud” which the Court pinned at the time of the execution of the loan documents not at the subsequent period in 2010 when the Plaintiffs learned of the foreclosure. The Court also ordered two other counts, concerning contract claims which carry longer six-year statute of limitations, to be dismissed as even those causes of actions were filed too late.   

Absent a successful attempt to obtain relief on appeal, there will be no further test of the validity of the borrowers’ substantive claims against the defendants in this case. The Plaintiffs’ failure to bring these claims in to court at an earlier time doomed their chance to seek what they considered justice for the conduct of their lender. 

The attorneys at Giddens & Gatton Law, PC represent individuals and lenders in mortgage foreclosure suits in New Mexico. Giddens & Gatton Law, PC is located at 10400 Academy Road N.E., Suite 350 in Albuquerque, New Mexico. Call the office at (505) 633-6298 to set up an appointment or visit the firm’s website at giddenslaw.com for more information