Short sales are looking more attractive.
Foreclosure changes in the state of Nevada are making short sales more attractive. Recently a number of lenders have commenced foreclosure through the judicial foreclosure process. A judicial foreclosure is governed by NRS 40. These are different from what the public is used to, the non-judicial process, governed by NRS 107. The judicial foreclosure is a lawsuit filed in court, just like any breach of contract case.
Deficiency Judgments. The potential issue with a judicial foreclosure is a deficiency judgment. In a normal foreclosure, there is potential liability to be pursued for the difference between what the property sells for at the trustee sale and the outstanding debt. Nevada is a recourse state. If you do not pay back your loan, you can be sued. (There have been some recent rules enacted to alleviate this issue (see the legislative memo —->here, but the Nevada Supreme Court is poised to limit these applications, Volkes v. BAC Home Loans Servicing, No. 57304, 2012 WL 642673 (Nev. Feb. 24, 2012)). Typically, in the last few years, foreclosure did not usually lead to the filing of a lawsuit by the lender for a “deficiency judgment.” In Nevada this lawsuit to seek this debt has to be filed within 6 months of the trustee sale date. See my post on this here. These lawsuits were simply not being filed, for the most part, by the large institutional lenders, only typically by the local, regional lenders. That has changed. Lenders are beginning to seek foreclosure via the judicial foreclosure process. (WHY? See the short history below.) Now, remember, the judicial foreclosure is a lawsuit. So, instead of the previous scenario where the lender had to decide after foreclosure, if they wanted to hire a Nevada attorney and pursue the homeowner; the lender is already in court. The judicial foreclosures showing up on line (search the filings here at the —->Eighth Judicial District Court) are demanding two causes of action: 1.) Judicial Foreclosure and 2.) Request For A Deficiency Judgment. The lender is already engaged with a Nevada attorney, so the lender does not have to make the decision to pursue the homeowner, they simply go to the next step and ask for a judgment immediately after the sheriff’s sale. Hundreds of these lawsuits have been filed in the Eighth Judicial District Court in Clark County in only the past 90 days.
Short Sales. Thus, a successful short sale, coupled with the lender releasing the seller of future deficiency liability (see my post on release language –> HERE) is an attractive option for a seller in Nevada.
Short History. Back in the summer of 2011 the Nevada Legislature passed Assembly Bill 284. AB 284 changed Nevada Foreclosure Law by adding stricter requirements for the foreclosure process. It’s complicated. You can read the Nevada Attorney General’s comments about it here. You can read the whole bill here. The NRS statute is 107.080. In summary – it required lenders/trustee to sign documents prior to foreclosing, which, if done improperly triggers potential civil and criminal penalties. This effectively slowed the number of trustee sales, notice of defaults, etc. There has been much discussion on this. Such as the Nevada Attorney General issuing a statement. Even the legislators that sponsored the bill wrote a memo about this subject recently. This is rare. And here we are, judicial foreclosures have commenced.
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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 Junior Lien/Senior Liens Rights To Sue & Other Changes
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
Nevada Residential Real Property Law 
March 24, 2012 at 7:34 am
It would appear that anyone considering a short sale should start it NOW. The judicial foreclosure issue keeps coming up on local radio discussions and I suspect that the banks will figure out that if they can wring “every last cent” out of a former customer, they will…and then the Bankruptcy courts will really overflow.
October 1, 2012 at 6:35 pm
[…] Nevada to perform a non-judicial foreclosure on an owner-occupied residential property …(in other words not a judicial foreclosure NRS 40.430 […]
August 6, 2015 at 9:05 am
Foreclosures involving mortgage notes originated by former Washington Mutual Bank: Over the past several years, members of the courts of the State of Nevada has colluded with JP Morgan Chase Bank to extort monies and homes from Washington Mutual borrowers. County Recorder records of filings of default notices after 9/25/2008 representing Washington Mutual as the defaulting institution are fraudulent. Because Washington Mutual had ceased to be a bank on the 2008 date. The Administrator of the Nevada Courts continues to collude with Chase Bank and Judge Delaney to facilitate Chase’s extortion against Washington Mutual homeowners. 12 U.S.C. 1821d oreempts the mediations
October 5, 2012 at 3:27 pm
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August 26, 2013 at 10:10 am
Mr. Welsh, is there any way to know which foreclosure method a lender will pursue? If it helps, my loan is owned by Fannie Mae, and serviced by Green Tree. As I understand, and please correct me if I’m wrong, if a lender pursues the non-judicial foreclosure, then they cannot sue you for the deficiency. They will instead 1099 you and take a tax deduction. But if they go the judicial foreclosure route, then, here in NV, they have 6 months to sue you and obtain a deficiency judgment. Is this correct, and is there some way to know ahead of time which route they will go?
Thanks,
Mike
August 26, 2013 at 12:18 pm
Well, they both have the right to come after you, (will exceptions, for new loans etc.). The six months is normal foreclosure (court house steps, auction). The judicial is a lawsuit, so they can ask for money right then. It’s complicated. Email me direct at darren@dwelshlaw.com and we can exchange information and I will explain it over the phone.
August 26, 2013 at 1:27 pm
I’ve just sent an email to the address you specified, thanks!!
September 30, 2013 at 3:53 pm
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October 2, 2013 at 5:53 pm
Hi again Darren,
So if my loan was originally BofA, and then Green Tree became my servicer several years ago (and the loan is owned by Fannie Mae), does that mean that Green Tree would be the party to sue for a deficiency judgment (if they decide to do that)?
If so, I went to the Clark County Courts Records Inquiry as indicated in your post. Then I changed the search by to party, clicked on Business and typed in Green Tree and hit search. Only two cases came up! If I conducted the search correctly, does this mean that Green Tree has not filed any lawsuits to obtain deficiency judgments here in Las Vegas?
October 2, 2013 at 6:23 pm
I screwed up, Under the party name, you have to put Green Tree Servicing LLC not just Green Tree and it will pull up many cases. However, when I start working backwards from 2013 looking at the closed breach of contract cases, I haven’t come across one case that shows a judgment. Most of them say
Notice of Dismissal
Notice of Dismissal Pursuant to NRCP 41(a)(1)
or
Order to Statistically Close Case
Civil Order To Statistically Close Case
So why are all these cases dismissed? This is all very puzzling..
October 2, 2013 at 6:57 pm
You should search your own name too.
October 2, 2013 at 8:28 pm
Ohhh too soon for that! We’re still current on the mortgage. Just trying to get an idea if Green Tree is actively going after borrowers for judgments these days. I’m either searching incorrectly, looking in the wrong place, or they’ve simply stopped filing these lawsuits…. ?
December 17, 2014 at 6:51 pm
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