Slow Foreclosing Lender May Lose Rights

Blog

Mar 02

We recently came upon a case in which a mortgage borrower had not made a payment in over 15 years.  The lender had taken no action to collect, nor to foreclose its mortgage lien. 

When action finally was brought, the borrower asserted that the lender had lost its right to enforce the mortgage.

By that time the note was no longer enforceable.  Wisconsin has a six-year statute of limitations on enforcement of a note. 

The lender did still have rights to enforce the mortgage, however. 

The borrower’s defense was an equitable doctrine known as laches.  Laches may be asserted against a party that delays making a claim, causing that party to lose its right to the claim.

Laches has three elements that must be proven, as follows:

  1. Unreasonable delay by the party asserting the claim
  2. Lack of knowledge or agreement by the party asserting the laches defense
  3. The delay must have prejudiced the party asserting laches

These elements do not arise very often, but it is important for litigators to be aware of this potential defense.  We have included this in our litigation defense checklist, so we never overlook it. 

Sometimes it is the little things that differentiate lawyers and outcomes.  In fact, it is almost always the little things that make the difference.

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