Nevada currently provides for the right of a foreclosing lender on real estate to pursue a deficiency judgment against the borrower on any type of property including a primary residence. Nevada is known as a full recourse state. The law provides for a six month period following the trustee’s sale in which the lender may file an action against the borrower to recover amounts owing.
Nevada becomes a nonrecourse state for new loans made starting October 1, 2009, for the purchase of residential property that is owner occupied. Thus the lender may no longer pursue a deficiency judgment against the borrower on such property. Although some may consider this the equivalent of sending life boats and vests to the Titanic days after the sinking, it is a significant development in Nevada real estate law.
For the new law to apply the following requirements must be met:
- The property is a single-family residence;
- The loan was used to buy the property;
- The borrower continuously occupied the property as a principal residence after the loan was made;
- The original loan was not refinanced;
- The loan was made by a financial institution.
Robert B. Noggle, Esq.
3 Responses
Regarding a purchase money 2nd trust deed originating in 2005: what steps and timeline must a lender follow in order to seek a defieciency judgement? A FNMA/FHLMC uniform note and TD were used.
The first foreclosed and title taken by the first TD holder in July of 2009.
I realize this is a detailed question and I am trying to find my options in the situation. I have heard conflicting information that the lender had up to 6 years to seek a deficiency judgement, but I am wondering at what point they need to declare thier intentions. I have read through the promissory note and TD and it seems that there is a formal process that must be followed that has not occured in this instance. Any suggestions as to my next step? Kindest regards
In original article you mention that lender has 6 months to pursue judgement, but then in response you mention 6 years. Which one is it?
I have went through a short sale in Nevada. I chosed a short sale because I lost 3500 dollars a year in state Pay and I could not simply pay it. I did my research on this vs a forclosure, and I was very fortunate to find an honest realtor that did not pull any hair over my eyes on the risk that I was taking. She first told me that she is not attorney and that she could only tell me if I chosed to persue a short sale that she would act as the third party in facitating the transaction. She explained to me that entering into a short sale with the bank is a contract -under Nevada contract law it is 6yrs that they have to file a law suit. Under Nevada foreclosure law it is 6months for the first mortage and then 2nd mortagor has up to two years. She also had given me some honnest information that was also beneificial, she mentioned that the above laws are inforced to day but the Nevada State Legislature is always changing the laws.
she pointed out to me of the risks envloved if they will accept my buyers offers to their counter offers, then one important thing she said to me that they will look at your situation of income their ablilty to collect the deficiency, and that if they choose to forego their rights to pursue the lawsuit it will be written in their approval for short sale letter.
Sure enough she was right, oh I received the permission to short sale but I worried about it because in my first approval letter that I received from them specifically said that they will retain their rights to sue if they have determined it was in their best interest to do so. After 9 months of hell going back and forth with offers that the bank would accept , and inwhich they also gave me a deadline if an aceptable buyer was not found by June 17th they will forclose, it finnally sold in June 10 2010. Then Just this september 2011, I get the biggest relief in my life, they sent me a second letter that they have wavied their rights to a law suit in that it was in their best interest to give me full release of the debt.
Please ,never second guess what these big institutions can or will do when it comes to us little guys trying to make a living. Just use you witts and know that no attorney nor agent can give you a 100% answer of what is in the banks minds and what they will do . You cannot second guess them. I was lucky because If I had been served a deficency judgement, I would have no choice but to seek an attorney as I had not the means to pay a deficency judgement of 209,400 on a 28,000 dollar salary. Also another thing to point out, it is a misnomer that your credit can be save on a short sale as well, before my short sale, my combined credit scores were 830. After that ,I took over a 200point hit to 610. Please know that in this businness there is unknown risk and it is a nasty and scary thing to go through in any decision that you have to make. For now until my credit recovers, I have no desire to buy unless I have cash, I am renting at the present time. Short sale or forclosure the risk is high and if you cannot keep up your payments, it will force a person to make some kind of decision. I wish all of you a nice thanksgiving and christmas.