I.    Junior (Seconds) Lien Holders  Right To Sue After Short Sale & Foreclosure –  AB 273

READ the entire bill here ===>http://www.leg.state.nv.us/Session/76th2011/Bills/AB/AB273_EN.pdf

There are changes to debt collection as to short sales in Nevada.  This bill has many points, from Seconds to Guarantors.  For real estate sales the major change is effective July 1, 2011.  There are certain restrictions on the ability to recover deficiency at all by Junior Lien Holders of a secured note created after June 2011.  But the 5 star change, is that as of July 1, 2011  junior lien holders (and perhaps senior) have only six (6) months to file suit against a home owner after the foreclosure.

A civil action by the junior lien holder against the home owner after a foreclosure sale of the real property or a sale in lieu of a foreclosure sale may only be commenced within 6 months after the date of the foreclosure sale or sale in lieu of a foreclosure.  This six month rule section applies only to an action commenced after a foreclosure sale or sale in lieu of a foreclosure sale that occurs on or after July 1, 2011.  But that is only foreclosures you ask?  Nope.  It is for short sales also.  A “sale in lieu of a foreclosure” is a short sale.  Sale in lieu of a foreclosure means a sale of real property pursuant to an agreement between the seller and lender in which the sales price of the real property is insufficient to pay the full outstanding balance of the obligation and the costs of the sale.  The short sale (close) or foreclosure (trustee sale) must occur after July 1, 2011.  Then, the Second Lien holder has 6 months, NOT SIX YEARS as was previous rule, to file a law suit for debt collection.  Here exactly what the law says,

A civil action not barred by NRS 40.430 or section 3 of this act by a person to whom an obligation secured by a junior mortgage or lien on real property is owed to obtain a money judgment against the debtor after a foreclosure sale of the real property or a sale in lieu of a foreclosure sale may only be commenced within 6 months after the date of the foreclosure sale or sale in lieu of a foreclosure.”

This Section 3.3 this act apply only to an action commenced after a foreclosure sale or sale in lieu of a foreclosure sale that occurs on or after July 1, 2011.

The explanation of this Section from the Legislature is here —-> Existing law authorizes a creditor under an obligation secured by a junior mortgage or deed of trust to bring an action to obtain a personal judgment against the debtor only if the action is commenced within 6 years after the date of the debtor’s default. (NRS 11.190) Under property securing such an obligation is the subject of a foreclosure sale, a trustee’s sale or a sale or deed in lieu of such a sale, the creditor may bring an action to obtain a personal judgment against the debtor only if the action is brought within 6 months after the foreclosure sale, the trustee’s sale or the sale in lieu of a foreclosure sale or trustee’s sale.

WHAT what does it mean?.  Since the complete ban on debt pursuit only applies to loans from here on, a consumer will not be able to rely on that now.  BUT, what is important is that all short sales (close) and foreclosures (trustee sale), after July 1, 2011, now leave the homeowner exposed for a law suit from the Junior Lien Holder for only six months.  This appears to be both owner occupied and investor.

II.  First Deed Rights To Sue On Short Sale –  SB 414

READ the entire bill here ===>    http://www.leg.state.nv.us/Session/76th2011/Bills/SB/SB414_EN.pdf

There are changes to debt collection as to short sales in Nevada.  The blog – TGIF Legal Tip: FORECLOSURE / DEFICIENCY is now outdated.  Effective June 13, 2011.  Pursuant to SB 414,  an owner occupied seller involved in a short sale, is not liable for a deficiency judgment provided 1.) the obligation secured by a mortgage or deed of trust was created on or after October 1, 2009; 2. ) the debt on the property was used to purchase 3.) the seller continuously occupied the home as her principal residence 4.) the lender approved the short sale and either A) did not mention the amount of money still owed or B) the lender specifically waived its right to recover the amount owed.

What does it mean?  The short sale lender approval is more important than ever.  Obviously if the deficiency is waived, great, but now if the approval does not declare exactly what future monies are owed, the lender is barred from seeking these monies (but only on loans issued since 2009 and owner occupied, personally it really does not seem to cover many homeowners.)

But the 6 star (bigger than 5) question is what about investor short sales?  Is the statute of limitations 6 months or 6 years for first on short sales?  Not clear.  NRS 40.455 which states, “the judgment creditor or the beneficiary of the deed of trust within 6 months after the date of the of the foreclosure sale or the trustee’s sale” must file.  It does not appear that this section was modified.  If this section is modified elsewhere in the law to define “foreclosure sale or the trustee’s sale” to include “short sale” as was clearly done when it comes to Junior Liens, this question will be answered.

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This is part of my short sale series listed below in alphabetical order:

7 Tips for Short Sale

Addendum to Short Sale Listing

Advance Fees Continued and the FTC

Advance Fees – Short Sales – FTC II

Charging for negotiating short sales/Negotiators

Deficiency Judgments Nevada

Foreclosure and the One Action Rule in Nevada

HAMP the Federal Shortsale Program coming April 2010

Income Taxes & Foreclosures/Shortsales

Lender Short Sale Approval Addendum

Nevada Supreme Court Mandatory Mediation Program and How it Affects Shortsale

Nevada Short Sale Documents

Seller Being Released From Liability Language in Shortsale

Seller Liability After Short Sale

Short Sale Advanced Fees

Short Sale Addendum to Purchase Agreement October 2010

Short Sale Wallet Size Answer Sheet

IRS PUBLICATIONS shortsales/foreclosures:

IRS publication on how 1099 taxes are calculated, exempt, etc.

IRS explanation as to taxes resulting from Foreclosure and Debt Cancellation.

Ten Facts about Mortgage Debt Forgiveness

Questions?  Call me. Darren Welsh, Esq. 702 245 1787  email me darren@dwelshlaw.com or drop me a TPS by filling out this form

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