This might seem to be a simple question, but it bears asking: If you feel your client's mortgage lender has wronged you, when do you need to file a suit against it? Now? When they sue? Before the statute of limitations?
All good answers, depending on the circumstances (especially the statute of limitations one). But the question is a complicated one, not least because of the various factors involved in mortgage litigation, and not least because mortgage cases have several different stages to them, and not least, also, because sometimes you don't want to get a lawsuit going: if the lender has done something wrong and your client is no longer paying your mortgage (but can't save the house in the long run) he gets the benefit of staying in that house until a foreclosure occurs, without paying rent or mortgage. So shooting from the hip and getting stuff going can be the exact wrong thing to do.
On the other hand, a lawyer can wait too long to file suit -- because Wisconsin, for all it's claiming it doesn't, really does have a "mandatory counterclaim" rule that requires, if your client is sued, that you sue back for everything you've got.
Two cases have now affirmed that landowners sued by the mortgage holder need to shoot back or lose their rights. In A.B.C.G. Enterprises, Inc. v. First Bank Southeast, N.A., 184 Wis.2d 465, 515 N.W.2d 904 (1994), claim preclusion and the common-law compulsory counterclaim rule barred a borrower's mortgage-related claims after the lender had secured "numerous" default judgments against the borrower. And A.B.C.G. paved the way for Kowske v. Ameriquest Mortg. Co., 317 Wis.2d 500, 767 N.W.2d 309, 2009 WI App 45, Wis.App., March 24, 2009 (NO. 2008AP496), which showed that settling a case can bar a counterclaim, too.
Kowske sued Ameriquest, in 2006, for claims of unfair practices in mortgage lending. Ameriquest claimed that the suit was barred by claim preclusion/common law compulsory counterclaim rules because in 2004 it had sued Kowske for foreclosure, and gotten a default judgment; Kowske had, before the sheriff's sale, redeemed the property. Ameriquest then stipulated to vacating the judgment and dismissing the foreclosure case... which means that the case never happened, right? It was a suit, then it was vacated, and dismissed without prejudice, so it shouldn't have had preclusive effects, you'd think.
Kowske's later suit, in 2006, asserted that Ameriquest had failed to provide a release of one of the two properties it held mortgages on -- with at least one failure occurring before the foreclosure. The circuit court held that Kowske should have brought that claim up in the foreclosure. Kowske appealed, arguing that the vacating of the final judgment made his case different from A.B.C.G. and therefore that he'd found a loophole.
The key thing from Kowske's point of view? He claimed that there was no final judgment on the merits. But the Court of Appeals disagreed, and rightly so: it pointed out that a final judgment of dismissal-by-stipulation is a final judgment nonetheless. The points to consider are: Was there a previous case? Did that result in a final judgment? And if yes to both of those, would this case upset that final judgment in some way? (And also: Did the litigant have a chance to bring this up in that prior case?)
Here, Kowske's claims would affect the amount of money exchanged between him and Ameriquest. Whatever he paid them to redeem the properties would be reduced if Ameriquest paid money back to him on this case, so that would affect or alter the prior judgment -- making claim preclusion and common-law counterclaim rules bar Kowske's later suit.
Kowske did have another option; instead of filing a new suit, he could have sought to reopen the old case under section 806.07(1)(g), Stats. That section allows a court to reopen a judgment at any time in an equitable case -- and foreclosures are equitable cases. While the length of time is problematic -- 2 years is a lengthy time to wait to seek to reopen a case -- I've had cases reopened after almost-as-long periods of time.