IMAG1702NRS 40 Does Not Limit Lenders’ Right to Sue Homeowners Even When the Note was Discounted on the Secondary Market.

In 2011 the Nevada Legislature passed A.B. 273.  One of the hot topics was how much a lender could sue a borrower for; if that lender purchased the note from a previous lender at a discounted price.  The discussion of the day (back in the summer of ’11) was that the current lender (who bought the note from a prior lender), pursuing the borrower was capped at the amount the suing bank paid to take over the loan. This seemed to be a protection for borrowers. There were numerous cases in the Nevada District System (Trial Level) that ruled in this way, in favor of the borrower, enforcing a cap. Basically the borrower was held to only be liable for what the current lender paid to buy the discounted note, which could be pennies on the dollar.

On December 24, 2014 the Nevada Supreme Court ruled that the language, ‘limited to the amount of the consideration paid by the bank,’ does not speak to the amount a bank or investor pays to buy the note, removing the cap. So, if bank 1 lends $400,000 and sells the note for pennies, say for $10,000 to bank 2, bank 2 can recoup the entire value of money lent or $400,000.  Many District Court cases were ruling that the deficiency was capped at the amount bank 2 paid to take over the loan.  No more.

The Supreme Court of Nevada stated:

“We therefore hold that NRS 40.451 does not in and of itself set an assignor-assignee, consideration-based limit on FFB’s recovery against respondents.”  First Fin. Bank v. Lane  339 P.3d 1289, 1294 (Nev.,2014) 

OTHER POSTS ON DEBT

Income Taxes & Foreclosure/Short Sales 2014 Update (12.17.2014)

Ten Facts about Mortgage Debt Forgiveness

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

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

OTHER SHORT SALE POSTS

7 Tips for Short Sale

Addendum to Short Sale Listing 1.26.2010

Advance Fees Continued and the FTC 1.6.2011

Advance Fees – Short Sales – FTC II 5.4.2011

Charging for negotiating short sales/Negotiators 10.1.2010

Deficiency Judgments Nevada 4.27.2007

Foreclosure and the One Action Rule in Nevada 4.10.2007

HAMP the Federal Shortsale Program coming April 2010

Income Taxes & Foreclosures/Shortsales 12.21.2007

IRS PUBLICATIONS shortsales/foreclosures:

Ten Facts about Mortgage Debt Forgiveness

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

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

Judicial Foreclosures (Short sales are looking more attractive..) 3.23.2012

Lender Short Sale Approval Addendum

Nevada Home Owner’s Bill of Rights (Foreclosure/Short Sale/Judicial Foreclosure)

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 4.20.2007

Short Sale Advanced Fees

Short Sale Addendum to Purchase Agreement October 2010

Short Sales and Bankruptcy and Waiting Periods 10.5.2012

Short Sale – “Dual Tracking” and the Homeowner’s Bill of Rights in Nevada May 2013

Short Sale Junior Lien/Senior Liens Rights To Sue & Other Changes

Short Sale Wallet Size Answer Sheet

Questions? email me darren@dwelshlaw.com

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This is a multi part blog on FHA loans.  I will be adding to this over the next few weeks.

What to know about FHA – Anti Flipping.

Unlike most conventional loans, FHA has unique requirements that prohibit the seller from having owned the home less than 90 days.  Attached is the  U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT MORTGAGEE LETTER 2006 -14

Property Flipping Prohibition Amendment

I suggest you read it and become familiar with it.  It describes that when writing an FHA loan as selling agent you should contact the listing agent and ensure the home has been owned by the same owner over the last 90 days.  If you are the listing agent, your seller will not be able to accept an FHA funded purchase if your seller has not owned the property for at least 90 days prior to contact date.

What is flipping:  Property flipping is a practice whereby a property is resold a short period of time after it is purchased by the seller for a considerable profit with an artificially inflated value, often abetted by a lender’s collusion with the appraiser. FHA’s policy prohibiting property flipping eliminates the most egregious examples of predatory flips of properties within the FHA mortgage insurance programs.

What is the sale date:  It is NOT close of escrow.  The resale date is the date of execution of the sales contract by the buyer that will result in a mortgage to be insured by FHA.  (See Mortgagee Letter 2006 -14 above Pg. 2)

Owner of Record:  The seller must also be the owner of record. Therefore you cannot “clean up the title” at close of escrow.  The seller must be on title at time of contract. (See Mortgagee Letter 2006 -14 above Pg. 2)

New Construction:  This rule does NOT apply.  Your buyer may use FHA funding on new construction.

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Exceptions?  Of course, this is real estate:  The rule does NOT apply to:

1.      Sales by HUD of its Real Estate Owned

2.      Sales by other United States Government agencies of single family properties pursuant to programs operated by these agencies.

3.      Sales of properties by nonprofits approved to purchase HUD-owned single-family properties at a discount with resale restrictions.

4.      Sales of properties that are acquired by the sellers by inheritance.

5.      Sales of properties purchased by employers or relocation agencies in connection with relocations of employees.

6.      Sales of properties by state and federally charted financial institutions and Government Sponsored Enterprises.

7.      Sales of properties by local and state government agencies.

8.      Upon FHA’s announcement of eligibility in a notice (i.e., ML), sales of properties located in areas designated by the President as federal disaster areas, will be exempt from the restrictions of the property-flipping rule.  The notice will specify how long the exception will be in effect and the specific disaster area affected.