Keyhole Financial

LEADERS IN THE DISTRESSED MORTGAGE MARKET

Statute of Limitations – What is "in rem" and how can it help you?


I recently wanted to foreclose on a property in Ohio where the Statute of Limitations expired on the promissory note. I contacted an attorney who had this wonderful suggestion.


Specifically, I’m responding to a question about the Statute of Limitation and the effect of proceeding with an in rem (property only) action. In Ohio, the statute of limitations for collecting on a promissory note is 6 years from acceleration of the loan (typically, the date of default). Our file shows this Note to be due for 3/15/2011, meaning the SOL has expired on the Note.

Due to recent case law, stating that foreclosure on a Note and foreclosure on a Mortgage constitutes separate actions, we are still able to proceed with your case, as the statute of limitations for mortgage enforcement is 21 years. However, since the SOL is expired on the Note (which is the document whereby the borrower incurs personal liability), an action to take personal money judgment against a borrower would be inadvisable in this case. My recommendation would be to proceed with an in rem action, which is the same as a normal foreclosure, but we do not ask for any personal judgment against the borrower.

The main effect of proceeding in this fashion comes at the end of the case when the property is sold. Normally, the property is sold to satisfy the amount due to you under the Note. If the property sells for less than the amount due, you can still collect against the borrower to satisfy the deficiency. However, with an in rem action, as there is no personal liability being enforced, whatever is received from the sale of the property is all that can be awarded to the Plaintiff.

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