Nevada laws About Foreclosures (Part 1):
Nevada state law allows mortgage lenders to foreclose on a deed of trust without ever appearing in court. Before we have a solid understanding of the issues involved, it is good to understand the basic definitions here.
Non-Judicial Foreclosure: First, let us define and understand the difference between a judicial and non-judicial foreclosure. A non-judicial foreclosure is done outside the jurisdiction of the court, and with the authority inherent in the trust deed. It has also its limitation where it does not solve all the problems and leaves some unresolved issues. The non-judicial process of foreclosure is used when a power of sale clause exists in a mortgage or deed of trust.
A “power of sale” clause is the clause in a deed of trust or mortgage, in which the borrower pre-authorizes the sale of property to pay off the balance on a loan in the event of their default.
What is the Power of Sale Clause: This power of sale exists and many times inherent in the trust deeds to the lender to sell the property and executed by the lender or their representative, typically referred to as the trustee. Regulations for this type of foreclosure process are outlined below in the “Power of Sale Foreclosure Guidelines”. Nevada has statutorily required language to be included in all deeds of trust (Nevada Revised statutes Chapter 107.030).
Private Trustee and No Intervention from the Court: If the deed of trust or mortgage contains a power of sale clause then the property may be sold by a private trustee without the intervention or use of a Court. If the instrument sets out how the sale is to be conducted that needs to be followed. However, if no procedure is outlined, then the following procedure should be adhered.
– A copy of the notice of default and election to sell must be mailed certified, return receipt requested, to the borrower, at their last known address, on the date the notice is recorded in the county where the property is located.
– Any additional postings and advertisements must be done in the same manner as for an execution sale in Nevada.
– Beginning on the day after the notice of default and election was recorded with the county and mailed to the borrower, the borrower has 15 days if the date of the original deed of trust was on or after July 1, 1949, and before July 1, 1957 and 35 days if the original deed of trust was on or after July 1, 1957, to cure the default by paying the delinquent amount on the loan.
– The owner of the property may stop the foreclosure proceedings by filing an “Intent to Cure” with the Public Trustee’s office at least 15 days prior to the foreclosure sale and then paying the necessary amount (usually being the total of missed payments and statutory fees and costs) to bring the loan current by noon the day before the foreclosure sale is scheduled.
– The foreclosure sale itself will be held at the place, the time and on the date stated in the notice of default and election and must be conducted in the same manner as for an execution sale of real property. In a trustee’s sale, there is no right of redemption AFTER the sale.
If the non-judicial trustee’s sale netted insufficient money from the sale price to pay the debt, then the lender has three 6 months after the sale to sue the borrower for the shortfall to seek a “deficiency judgment.”
As we all know, Nevada is a non-judicial foreclosure state in which lenders are hampered somewhat in collecting against debts remaining after foreclosure. First, the time period is limited to six months. Second, it is expensive to file lawsuit. Third, the lenders already suffered because the homeowners did not pay them for many months, and in some cases years. Fourth, they had destroyed the property and it would be expensive and time consuming to fix it. Fifth, no prediction can be made if the lenders would get some money because the homeowners can always file bankruptcy. Sixth, even if the lenders win the lawsuit, it is difficult to execute the judgment because finding the assets of the homeowners is very difficult and time consuming. The loophole lenders of second deeds of trust use, however, allows them to stand on the sidelines during the foreclosure and collect on the debt later.