Black & LoBello has received numerous inquiries regarding the new real estate laws discussed in our previous blog post. We thank you for your patronage of our blog and for your interest in these exciting new protections for homeowners. Several inquiries have asked for clarification regarding the manner in which the new laws regarding holders of second mortgages interact with the older laws regarding holders of first mortgages. We provide the following clarification for your convenience:
NRS 40.455 states that the holder of a second mortgage has to sue to collect a deficiency within 6 months after the foreclosure sale or trustee sale. The new law, AB 272, states that holder of a second mortgage must sue within 6 months for deficiencies resulting from a foreclosure sale, trustee sale, short sale or deed in lieu of foreclosure. This is how the laws work together:
- First mortgage loans – Deficiency collection lawsuits must be filed within six months after a foreclosure sale.
- First mortgage loans – Deficiencies can only be collected on first loans taken out BEFORE October 1, 2009. First loans taken out after that date are non-recourse loans.
- Second mortgage loans – Some collection lawsuits must be filed within six months. The six month limit on deficiency collections only applies to foreclosure sales, trustee sales, short sales and deeds in lieu of foreclosure that are sold or have sales closed AFTER July 1, 2011.
- Second Mortgage loans – Deficiencies can only be collected on second loans taken out BEFORE June 10, 2011. Second loans taken out after that date are non-recourse loans.
Note that as these are brand new laws, the interpretation of these laws by real estate practitioners has not yet been settled and the laws have not yet been challenged and interpreted in court.