Nevada currently provides for the right of a foreclosing lender on real estate to pursue a deficiency judgment against the borrower on any type of property including a primary residence. Nevada is known as a full recourse state. The law provides for a six month period following the trustee’s sale in which the lender may file an action against the borrower to recover amounts owing.
Nevada becomes a nonrecourse state for new loans made starting October 1, 2009, for the purchase of residential property that is owner occupied. Thus the lender may no longer pursue a deficiency judgment against the borrower on such property. Although some may consider this the equivalent of sending life boats and vests to the Titanic days after the sinking, it is a significant development in Nevada real estate law.
For the new law to apply the following requirements must be met:
- The property is a single-family residence;
- The loan was used to buy the property;
- The borrower continuously occupied the property as a principal residence after the loan was made;
- The original loan was not refinanced;
- The loan was made by a financial institution.
Robert B. Noggle, Esq.
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Regarding a purchase money 2nd trust deed originating in 2005: what steps and timeline must a lender follow in order to seek a defieciency judgement? A FNMA/FHLMC uniform note and TD were used.
The first foreclosed and title taken by the first TD holder in July of 2009.
I realize this is a detailed question and I am trying to find my options in the situation. I have heard conflicting information that the lender had up to 6 years to seek a deficiency judgement, but I am wondering at what point they need to declare thier intentions. I have read through the promissory note and TD and it seems that there is a formal process that must be followed that has not occured in this instance. Any suggestions as to my next step? Kindest regards
Dear Mary Figueras,
The statute of limitations in Nevada is six years for contract actions. A bank loan is a contract action, so a lender has six years to bring a lawsuit to collect a deficiency on a bank loan. The bank does not have to announce its intentions at all. To initiate collection, a bank simply has to file a complaint in court prior to the expiration of the six year time period, which begins on the date of foreclosure sale. If a person signed a promissory note or other instrument regarding the deficiency, then the terms of that promissory note or instrument may limit, restrict or prohibit the ability of the bank to collect on the deficiency – or it may not. The promissory note or instrument must be examined and analyzed by an attorney so that the borrowers rights and obligations to the bank may be explained.
Feel free to contact me if you have any further concerns.
Sincerely,
Carlos L McDade, Esq.
In original article you mention that lender has 6 months to pursue judgement, but then in response you mention 6 years. Which one is it?