The 76th Nevada Legislative Session adjourned June 7, 2011 with several new bills... now law... that will impact the real estate industry and in particular foreclosures and short sales. Here is a summary of those bills:
AB 273 prevents banks from “double-dipping” and going after borrowers for the full amount of the deficiency they owe on their mortgage loan when lenders have received compensation from other sources. It will cap the amount a third party can be awarded if they bought the right to the deficiency for pennies on the dollar. Finally, it will reduce the amount of time a junior lien holder has to file for a deficiency from the current six years to six months, to be in line with timeframes for primary lien holder.
Under Section 3 of AB 273, a lender may not collect a deficiency remaining on a second mortgage if it was taken out after June 10, 2011.
This law will apply if:
- the lender is a financial institution;
- the real property is a single-family house;
- the homeowner owned the property;
- the borrower used the loan to purchase the property;
- the homeowner lived in the property and
- did not refinance the loan.
Section 3 also expands the protection afforded to homeowners by prohibiting collection of deficiencies on an eligible second mortgage after a foreclosure sale, trustee sale, short sale and deed in lieu of foreclosure, protecting Nevadans who cooperate with the banks and try a short sale or deed in lieu of foreclosure but are not released from the deficiency.
The new law states that the lender will not be allowed to collect from both the insurance company and the homeowner. Section 2 of AB 273 directs judges to subtract the amount of proceeds received by, or payable to, the holder of a second mortgage from an insurance policy from the amount owed by the homeowner. The laws in Section 2 will only apply to second mortgages taken out after June 10, 2011.
NRS 40.455 states that the holder of a mortgage has to sue to collect a deficiency within 6 months after the foreclosure sale or trustee sale. The new law, AB 273, states that holder of a second mortgage must sue within 6 months for deficiencies resulting from a foreclosure sale, trustee sale, short sale or deed in lieu of foreclosure. This is how the laws work together:
- First mortgage loans – Deficiency collection lawsuits must be filed within six months after a foreclosure sale.
- First mortgage loans – Deficiencies can only be collected on first loans taken out BEFORE October 1, 2009. First loans taken out after that date are non-recourse loans.
- Second mortgage loans – Some collection lawsuits must be filed within six months. The six month limit on deficiency collections only applies to foreclosure sales, trustee sales, short sales and deeds in lieu of foreclosure that are sold or have sales closed AFTER July 1, 2011.
- Second Mortgage loans – Deficiencies can only be collected on second loans taken out BEFORE June 10, 2011. Second loans taken out after that date are non-recourse loans.
Note: New laws do not impact First mortgage loans for short sales – unless the deficiency judgment is successfully negotiated in the short sale, the lien holder has 6 years to pursue a deficiency judgment after a short sale.
These are brand new laws, the interpretation of these laws by real estate practitioners has not yet been settled and the laws have not yet been challenged and interpreted in court.
Foreclosures and short sales: makes it a misdemeanor for a bank to unreasonably delay responding to a short sale offer. It spells out that offers to purchase a home in a short sale should be accepted or rejected within 90 days. It also prohibits a banking or financial institution from getting a deficiency judgment against a borrower if they agreed to a short sale and other conditions (currently on law) are met. Note: I am working on getting further clarification and interpretation on this last point.
This bill ensures that the demand letter for an HOA ir its management company must remain effective for a period of no less than 15 working days from the date of delivery to the owner or his/her agent. If there are changes, they must be identified within that timeframe and title company, agent notified.
On May 20, 2011 Nevada Governor Brian Sandoval approved Assembly Bill 284 to be signed into law. Co-authored and supported by Black & LoBello’s Managing Partner, Tisha Black Chernine, AB 284 will help restore transparency and integrity to the foreclosure process. Some of the changes enacted by AB284 are as follows:
- Defines who can act as a foreclosure trustee in the state of Nevada;
- Defines a standard of care for such trustee;
- Requires that all assignments or trust deeds affecting real property be recorded in the County Recorder’s office where the property is situated;
- Requires a foreclosing trustee to file an sworn Affidavit with the Notice of Default;
- Requires the Affidavit of Authority which details the arrearages, associated costs, and names the beneficiary (often called investor) of the deed of trust;
- Increases criminal penalties where “robo-signing” conduct occurs ; and
- Creates a NEW private right of action for borrowers, which includes attorneys fees and a mandatory fine when a foreclosure has not proceeded properly.
Read more from Tisha Black Chernine, Esq - AB 284 Restores Foreclosure Process
SB 314Revises various provisions relating to residential property.
This bill would provide for the registration, permitting and regulation of asset management companies and their employees and agents through the Real Estate Division. Asset management companies provide management services for real property which is in foreclosure and which is owned by a bank, mortgage broker, mortgage banker, credit union, thrift company or savings and loan association, or any subsidiary thereof or a governmental entity. Such companies manage the property, performing services such as securing the property by changing locks, removing trash and debris, cleaning the home and surrounding property, performing maintenance and repairs of homes and disposing of the personal property of homeowners left in homes which are in foreclosure and which the legal owner has deemed abandoned.
Buried deep in this bill is also a provision that removes the ability for the purchaser to waive the SRPD, and spells out that a seller may not require a purchaser to waive the SRPD. It also adds that if an asset manager knows of any defects in the property, he must give written notice of the defect(s) to the purchaser. It will be effective upon passage and approval for the purposes of adopting regulations and performing administrative tasks, and October 1, 2011, for all other purposes.
REO listings are now controlled by SB 314.
SB 314, effective October 1, 2011 is a new law that controls “asset management,” “Asset management” is defined as those who, “manage, oversee or direct actions taken to maintain any real property, including, without limitation, any actions taken to preserve, restore or improve the value and to lessen the risk of damage to the property on behalf of a client before a foreclosure sale or in preparation for liquidation of real property owned by the client pursuant to a foreclosure sale.”
"Client" means: (1) A bank, mortgage broker, mortgage banker, credit union, thrift company or savings and loan association; (2) mortgage holding entity chartered by Congress; or (3) A federal, state or local governmental entity, for whom an asset management company provides asset management.
Persons working with lenders/REO must hold an asset manager “certificate of registration.”
A person who wishes to be registered as an asset manager in Nevada must file a written application and pay the fee of $2,000 and a fee of $500 for the issuance of the initial certificate of registration. An asset manager must also gain a policy of insurance written by an insurance company authorized to do business in Nevada which is sufficient to reimburse real property owners for, without limitation, any damage to real property in foreclosure, the wrongful disposal of property or wrongful eviction.
Property Management Certificate Required.
A person can avoid having to register as an asset manager provided they have a current permit to engage in property management pursuant to NRS 645. The listing agreement/property management agreement must include an “asset management” provision of pursuant to NRS 645.6056.
Nevada Assembly Bill 373 provides that a person in possession of real property who, under certain circumstances, removes, conceals or destroys any real property that is subject to foreclosure with the intent to defraud and who causes a secured party to suffer pecuniary loss, is guilty of a misdemeanor. This new criminal law takes effect on October 1, 2011. Homeowners that purposely trash their homes before a foreclosure sale in order to make the bank “pay” will find themselves subject to arrest and prosecution after the effective date of this new law.
Energy consumption forms: Another win for homeowners is AB432, which requires energy auditors to be licensed and repeals a requirement that home sellers complete an energy consumption form. This eliminates the need for the form, sellers are still free to seek an energy audit of their home if they want one.
Real estate transactions, taxes and fees: one of the biggest wins for Nevada homeowners during the Legislature was AB271, a law prohibiting private transfer fees in Nevada. This legislation took effect when it was signed into law on May 20.
NVAR’s Legislative Committee identified private transfer fees (also called reconveyance fees, capital recovery fees, or private transfer taxes) as a top concern since they can create last-minute complications that keep a home sale transaction from closing. Such fees can hamper home sales and create title and lending problems.
Such fees are generally attached to a property as a covenant that requires they be paid (usually at a cost of 1 or 2 percent of the purchase price of a home) to a private entity every time the property changes hands, for periods up to 99 years.
Real Estate License Renewals
The bill to repel the 4 year licensing requirement for REALTORS did not pass. So if you renew after July 1,2011 you will have to renew for 4 years. This means your license fee will be DOUBLE after July 1st. The Commission has yet to decide on the CE issue, but it most likely will be 24 hours the first 2 years and 24 hours the next 2 years with 50% of the hours being classroom hours...stay tuned.
Hand Held Phones & Texting Banned for Drivers
This bill prohibits the use of a cell phone without a hands-free device while driving, and prohibits typing/reading data while driving (any non-voice communication, including texting, email, IM, web browsing, etc.). Violation is a misdemeanor with fines increasing with each offense. This is considered a "primary offense", meaning you can get pulled over and cited for it. Warnings will be issued immediately; law goes into effect October 1st withcitations being issued starting January 1, 2012.
The Service Tax on real estate transactions was defeated…. For now!
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