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:
Addendum to Short Sale Listing
Advance Fees Continued and the FTC
Advance Fees – Short Sales – FTC II
Charging for negotiating short sales/Negotiators
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
Seller Being Released From Liability Language in Shortsale
Seller Liability After Short Sale
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
June 17, 2011 at 11:03 am
So inquiring minds want to know: “Effective June 13, 2011” applies to which:
1. A short sale culminated after that date?
2. A past short sale before that date, if the lien holder has not yet started a suit for deficiency?
and are we sure that this bill doesn’t apply only to mortgages secured after October 1, 2009?
June 17, 2011 at 3:47 pm
It appears to be the owner occupied non-refinancing consumer is protected from jr.’s as of June 2011 as to the ability to be sued at all. The statute of limitations to sue on a short sale by a 2nd and it would appear the 1st, is 180 days provided the short sale or foreclosure takes place on or after July 1, 2011.
June 17, 2011 at 4:19 pm
I have the same question as John: 1.) the obligation secured by a mortgage or deed of trust was created on or after October 1, 2009; — this seems to say only for loans/homes purchased after 10/1/09 (that were not cash out refinances) would benefit from this new law?
Sia Howe
June 17, 2011 at 4:32 pm
CORRECT, for loans after 10.1.2009 jr has NO right at all to sue (if all terms met). So this protection of FULL release only applies to loans after 10.1.2009.
BUT loans prior to now that get foreclosed or short sale, and foreclosure or short sale occurs on or after July 1, 2011 NEW RULE! Jr has only 6 months to file suit, not SIX (6) years.
June 17, 2011 at 4:42 pm
Hate to sound slow but am I understanding correctly:
Loans orginated PRIOR to 10.1.09 and short sold or foreclosure recorded after 7/1/11 – both 1sts and Jrs now only have the 6mths to pursue a judgement? As long as the occupancy and blah blah was met?
Sia Howe
June 17, 2011 at 4:57 pm
That is how I read it, yes. Except as far as the 6 months, there is no requirement, it would appear, to be owner occupied. The owner occupied is only for FULL release for those loans originated after 10.2009.
June 17, 2011 at 6:13 pm
Hmm, I think it is flowchart time!
June 20, 2011 at 9:47 am
[…] Daren Welsh’s Blog on A 271 […]
July 27, 2011 at 6:00 pm
What if the juniour lien is a HELOC? How long do they have to persue?
October 20, 2011 at 11:26 pm
[…] I believe one of the most important things to negotiate during a short sale is the deficiency. Will the bank or the investor on the loan have the right to find the homeowner after the sale of the property and ask them to start repaying them a portion of the loss? It should be noted that there was a law passed (to read the full bill, click here) on July 1, 2011 in the state of Nevada that banks now only have 6 months after the sale of a property to pursue a deficiency (prior to this law passing the banks had up to 6 years to pursue homeowners for deficiency). To read more about the new deficiency law in Nevada from a local attorney, click here. […]
December 16, 2011 at 6:05 pm
[…] Take a look at the commentary at Darren’s blog: https://ameglegal.wordpress.com/2011/06/17/short-sale-junior-lien-holder-rights-other-changes/ […]
February 9, 2012 at 10:01 am
Foreclosure Investor…
[…]Short Sale Junior Lien/Senior Liens Rights To Sue & Other Changes « Nevada Residential Real Property Law[…]…
March 9, 2012 at 6:22 pm
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October 1, 2012 at 6:35 pm
[…] importantly were the three cases before the Nevada Supreme Court this morning, addressing, statute of limitations on short sales, and junior liens and the right to sue borrowers as passed by … […]
October 6, 2012 at 8:59 pm
Darren, does the new ruling allow bsnks to foreclose if they were not given a certificate in mediation? I am an ameg Realtor and have clients that were not given certificates to go forward because a big bank could not produce docs. Must the bank start over with NOD, then mediation? Can they now go forward with judicial foreclosure?