Before the foreclosure crisis, federal and state laws regulating mortgage servicers and foreclosure procedures were relatively limited and tended to favor foreclosing lenders. Now, however, many federal and state laws give protections to borrowers. Servicers generally must provide borrowers with loss mitigation opportunities, account for each foreclosure step, and carefully comply with foreclosure laws.
Also, most people who take out a loan to buy a residential property in Nevada sign a promissory note and a deed of trust, which is like a mortgage. These documents give homeowners some contractual rights in addition to federal and state legal protections.
So, don't get caught off guard if you're a Nevada homeowner behind in mortgage payments. Learn about Nevada's foreclosure laws and process, from missing your first payment to a foreclosure sale.
In a Nevada foreclosure, you'll most likely get the right to:
Once you understand the Nevada foreclosure process and your rights, you can make the most of your situation and, hopefully, work out a way to save your home or at least get through the process with as little anxiety as possible.
The period after you fall behind in payments, but before a foreclosure officially starts, is generally called the "preforeclosure" stage. (Sometimes, people refer to the period before a foreclosure sale happens as "preforeclosure," too.)
The Nevada Homeowner's Bill of Rights, which has protections for borrowers similar to federal law, protects borrowers facing possible foreclosure in Nevada. (Nev. Rev. Stat. §§ 107.400 and following).
At least 30 calendar days before recording a Notice of Default (see below) or starting a judicial foreclosure action (see below) and at least 30 calendar days after a borrower's default, the servicer must provide the borrower a written notice containing, among other things:
The servicer must contact the borrower in person or by telephone to discuss the borrower's financial situation and explore options to avoid foreclosure 30 days before starting a foreclosure. However, if the servicer can't reach the borrower, it may proceed with foreclosure if it meets certain calling and mailing requirements. (Nev. Rev. Stat. § 107.510).
Once the borrower submits a complete loss mitigation application, the foreclosure is stalled while the loan servicer reviews the application and makes a decision. The servicer must decide to approve or deny loss mitigation no later than 30 days after the borrower submits a complete application. (Nev. Rev. Stat. § 107.530).
Even if the lender denies the loss mitigation, it generally can't foreclose until any applicable appeals period, usually 30 days, has expired. (Nev. Rev. Stat. § 107.530).
Under the Nevada Homeowner's Bill of Rights, the servicer must establish a single point of contact whose responsibilities include:
The contact person remains assigned to the account until all loss mitigation options are exhausted or until the borrower brings the account current. (Nev. Rev. Stat. § 107.540).
The Nevada Homeowner's Bill of Rights protections generally apply to first mortgage loans for properties that are residential and owner-occupied. (Nev. Rev. Stat. § 107.450). But the protections don't apply to borrowers who have:
Institutions that foreclosed on 100 or fewer owner-occupied homes in the preceding annual reporting period, as established by their primary regulator, are exempt from the requirements under the Homeowner's Bill of Rights. (Nev. Rev. Stat. § 107.460).
If you default on your mortgage payments in Nevada, the lender may foreclose using a judicial or nonjudicial method.
A judicial foreclosure begins when the lender files a lawsuit asking a court for an order allowing a foreclosure sale. The lender will automatically win the case if you don't respond with a written answer.
But if you choose to defend the foreclosure lawsuit, the court will review the evidence and determine the winner. If the lender wins, the judge will enter a judgment and order your home sold at auction.
A nonjudicial foreclosure is also known as a "statutory foreclosure," which means the foreclosure follows the requirements that state law sets out. In this kind of foreclosure, the lender conducts the out-of-court procedures described in the state statutes. After finishing the required steps, the lender can sell the home at a foreclosure sale.
Most lenders opt for the nonjudicial process because it's quicker and cheaper than litigating the matter in court.
Again, most residential foreclosures in Nevada are nonjudicial. Here's how the process works.
Again, the Nevada Homeowner's Bill of Rights requires that at least 30 calendar days before officially starting a foreclosure and at least 30 calendar days after the default, the servicer or loan owner must send you (the borrower) a notice that contains information about the account. The notice must include the total amount needed to cure the default and information about foreclosure prevention alternatives, among other things. (Nev. Rev. Stat. § 107.500).
This information might be included as part of the breach letter.
The Nevada nonjudicial foreclosure process formally begins when the trustee records a Notice of Default and Election to Sell (NOD) in the office of the recorder in the county where the property is located, providing three months to cure the default. (Nev. Rev. Stat. § 107.080).
A copy of the NOD must be sent to each person with a recorded request for a copy and each person with an interest or claimed interest in the property by registered or certified mail within ten days after the NOD is recorded. (Nev. Rev. Stat. § 107.090).
For a residential foreclosure, a copy of the NOD must be posted on the property 100 days before the sale. (Nev. Rev. Stat. § 107.087).
The trustee or beneficiary (lender) must record a notarized affidavit along with the NOD that gives, based on a review of business records, information about the trustee, loan, and loan owner. (Nev. Rev. Stat. § 107.0805).
At least 60 days before the sale date, the trustee must provide the borrower with a separate "Danger Notice" stating that they're in danger of losing their home to foreclosure, along with a copy of the original promissory note.
For owner-occupied housing, the notice must be:
After the expiration of the three months following the NOD recording, the trustee must give notice of the time and place of the sale by recording the notice of sale and by:
At the sale, the lender usually makes a credit bid. The lender can bid up to the total amount owed, including fees and costs, or it may bid less.
In some states, including Nevada, when the lender is the high bidder at the sale but bids less than the total debt, it can get a deficiency judgment against the borrower, subject to some limitations (see below).
The property becomes "Real Estate Owned" (REO) if the lender is the highest bidder. But if a bidder, say a third party, is the highest bidder and offers more than you owe, and the sale results in excess proceeds—that is, money over and above what's needed to pay off all the liens on your property—you're entitled to that surplus money.
A few potential ways to stop a foreclosure include reinstating the loan, redeeming the property before the sale, or filing for bankruptcy. Of course, if you can work out a loss mitigation option, like a loan modification, that will also stop a foreclosure.
For owner-occupied housing, the borrower can reinstate the loan by paying the arrearage, costs, and fees. This right expires five days before the date of the foreclosure sale. (Nev. Rev. Stat. § 107.0805, § 40.430).
One way to stop a foreclosure is by "redeeming" the property. To redeem, you must pay off the full loan amount before the foreclosure sale.
Some states also provide foreclosed borrowers a redemption period after the foreclosure sale, during which they can buy back the home. However, Nevada law doesn't provide a redemption period following a nonjudicial foreclosure sale. (Nev. Rev. Stat. § 107.080).
If you're facing a foreclosure, filing for bankruptcy might help. In fact, if a foreclosure sale is scheduled to occur in the next day or so, the best way to stop the sale immediately is by filing for bankruptcy.
Once you file for bankruptcy, something called an "automatic stay" goes into effect. The stay functions as an injunction, which prohibits the lender from foreclosing on your home or otherwise trying to collect its debt, at least temporarily.
In many cases, filing for Chapter 7 bankruptcy can delay the foreclosure by a matter of months. Or, if you want to save your home, filing for Chapter 13 bankruptcy might be the answer. To find out the options available, speak with a local bankruptcy attorney.
The borrower's total mortgage debt sometimes exceeds the foreclosure sale price in a foreclosure. The difference between the total debt and the sale price is called a "deficiency."
For example, say the total debt owed is $600,000, but the home sells for $550,000 at the foreclosure sale. The deficiency is $50,000. In some states, the lender can seek a personal judgment against the debtor to recover the deficiency. In most cases, once the lender gets a deficiency judgment, the lender may collect this amount—in the above example, $50,000—from the borrower.
Deficiency judgments are generally allowed in Nevada, subject to some limitations.
In Nevada, a lender may obtain a deficiency judgment following a foreclosure sale if it files the suit within six months. (Nev. Rev. Stat. § 40.455).
But the amount of the judgment is limited to the lesser of:
If the party seeking the deficiency judgment acquired the right to obtain the judgment from a party that previously held that right, the judgment is limited to the difference between the amount the party paid to acquire the loan and the larger of the property's fair market value or the amount paid for the property at the foreclosure sale, plus interest and reasonable costs. (Nev. Rev. Stat. § 40.459).
For loans taken out after October 1, 2009, deficiencies are prohibited for purchase money loans (that haven't been refinanced) held by a bank or other financial institution on single-family residences owned by the borrower at the time of the foreclosure sale, which have been occupied continuously by the borrower since taking out the loan. (Nev. Rev. Stat. § 40.455).
Under Nevada state law, the bank can't seek a deficiency judgment against you after a short sale or deed in lieu of foreclosure when all of the following apply:
After a Nevada foreclosure sale, the property's new owner must give you a notice to quit (move out) before starting an eviction action in court.
For more information on federal mortgage servicing laws and foreclosure relief options, go to the Consumer Financial Protection Bureau (CFPB) website.
Get tips on what to do—and what not to do—if you're facing a foreclosure.
Find out if foreclosures are on the rise.
If you have questions about Nevada's foreclosure process or want to learn about potential defenses to a foreclosure and possibly fight the foreclosure in court, consider talking to a foreclosure attorney.
It's also a good idea to talk to a HUD-approved housing counselor to learn about different loss mitigation options.