This is a complex topic and should only be left to seasoned attorneys. Our law office, Law Office of Malik W. Ahmad is well situated to handle these kinds of lawsuits and we have successfully settled, or litigated to an acceptable levels all such lawsuits.
Guarantors of a purchase-money loan on real property in Nevada should now be entitled to the anti-deficiency protections afforded under NRS 40.455 through 40.459, w which statutes limit the amount of any deficiency judgment to the lesser of either:
1. The amount by which the amount of the indebtedness which was secured exceeds the fair market value of the property sold at the time of the sale, with interest from the date of the sale, or
2. The amount which is the difference between the amount for which the property was actually sold and the amount of the indebtedness which was secured, with interest from the date of sale.
The Nevada legislature has recently enacted Nevada Assembly Bill 273, which provides a third subsection with applicability in situations where a foreclosing lender “acquired the right to obtain the judgment from a person who previously held that right”, such as where an originating lender sell a note to a third party lender. In such a situation, the deficiency amount is limited (beyond the amounts described in NRS 40.459(1) and (2), described above), to also include the further limitation to any available deficiency that: “If the person seeking the judgment acquired the right to obtain the judgment from a person who previously held that right, the amount [of deficiency recoverable is limited by the amount] by which the amount of the consideration paid for that right exceeds the fair market value of the property sold at the time of sale or the amount for which the property was actually sold, whichever is greater, with interest from the date of sale and reasonable costs, whichever is the lesser amount.” The intent of the Nevada legislature was clearly to provide certain protections to guarantors.
The Nevada Supreme Court has expressly held that guarantors are entitled to the benefits of Nevada’s anti-deficiency legislation, stating that without such protection, the court “would thereby detach lenders from the deficiency standard imposed by the legislature and subject guarantors to the vagaries of a lender’s scruples in every transaction.” First Interstate Bank of Nevada v. Shields, 102 Nev. 616, 619, 730 P.2d 429 (1986) (emphasis supplied). The Ninth Circuit, applying the Shields decision, has similarly held that guarantors are entitled to the benefits and protections of Nevada’s anti-deficiency legislation. FBW Enterprises v. The Victorio Company, 821 F.2d 1393, 1394-95 (9th Cir. 1987).
The Nevada legislature has recently enacted new legislation aimed at avoiding the scenario of a lender suing a guarantor without first foreclosing. Under Nevada Assembly Bill 273, signed by the Nevada Governor on June 10, 2011, the following language was added to NRS 40.495:
(4) If, before a foreclosure sale of real property, the obligee commences an action against a guarantor, surety or other obligor, other than the mortgagor or grantor of a deed of trust, to enforce an obligation to pay, satisfy, or purchase all or part of an indebtedness or obligation secured by a mortgage or lien upon the real property:
(a) The court must hold a hearing and take evidence presented by either party concerning the fair market value of the property as of the date of the commencement of the action. Notice of such hearing must be served upon all defendants who have appeared in the action and against whom a judgment is sought, or upon their attorneys of record, at least 15 days before the date set for the hearing.
(b) After the hearing, if the court awards a money judgment against the debtor, guarantor or surety who is personally liable for the debt, the court must not render judgment for more than:
(1) The amount by which the amount of the indebtedness exceeds the fair market value of the property as of the date of the commencement of the action; or
(2) If a foreclosure sale is concluded before a judgment is entered, the amount that is the difference between the amount for which the property was actually sold and the amount of the indebtedness which was secured, whichever is the lesser amount.
The lender has the right to sue the borrower for the deficiency within six months after the date of the foreclosure sale, unless all of the following conditions are met:
• The mortgage lender is a financial institution.
• The property securing the mortgage is a single-family dwelling.
• The borrower was the owner of the property at the time of the foreclosure sale.
• The borrower used the proceeds of the mortgage to purchase the property.
• The property was the borrower’s primary residence continuously after the borrower took out the mortgage.
• The borrower did not refinance the mortgage.
If all of these conditions are met, the homeowner is not liable to the lender for any deficiency remaining after the foreclosure sale. Nev. Rev. Stat. § 40.455.
The amount of the deficiency is limited to the lesser of these two amounts:
• The difference between the amount of the outstanding mortgage debt and the property’s fair market value at the time of the foreclosure sale, or
• The difference between the amount of the outstanding mortgage debt and the foreclosure sale price. Nev. Rev. Stat. §40.459.
Summary of NV Laws Nonjudicial Not if all of the following conditions are met: (a) lender is a financial institution; (b) mortgage loan originated on or after October 1, 2009; (c) property securing mortgage is a single-family dwelling owned by borrower at the time of the foreclosure sale; (d) mortgage debt was used to purchase the property; (e) property was borrower’s primary residence continuously from the time mortgage was executed; and (f) borrower did not refinance the mortgage. Allowed in all other foreclosures, but amount that may be recovered is limited to lesser of (a) the difference between the outstanding debt and the fair market value, or (b) the difference between the outstanding debt and the foreclosure sale price.