Foreclosure Timeline, Consequences, and other Options in Nevada
Foreclosure – A foreclosure is defined as a legal process in which a lender or other entity reposes real property following a borrower’s failure to make their payments.
In the state of Nevada there are two forms of foreclosure proceedings that are allowed, a judicial foreclosure and a non-judicial foreclosure. The types foreclosure proceedings allowed in other states may vary. If you would like information on foreclosures for a state outside of Nevada, please contact a local professional familiar with that particular state’s foreclosure process.
Judicial Foreclosure – A judicial foreclosure is one that takes place in a court of law. In order for this type of foreclosure to occur, the lender (or other foreclosing entity) files for a foreclosure with the courts and also records a notice of pending lawsuit (lis pendes) against the property. Following this recording, a trial will occur. Upon conclusion of this trial, the court will issue a judgment allowing the property to be sold through the means of a judicial sale (auction). If proceeds of this judicial sale do not allow for the lender to recoup the entire debt plus all other fees incurred during the default and foreclosure process, the lender can pursue the borrower for the remaining amount. Although this form of foreclosure is allowed in the State of NV, it is rarely used by lenders.
Non-Judicial Foreclosure – A non-judicial foreclosure occurs outside of the courts, and is currently the most common form of foreclosure in Nevada. A lender has authority to proceed with this type of foreclosure through the Power of Sale clause contained in the Deed of Trust that the borrower signed when he/she obtained the loan. Although this type of foreclosure is done outside of court, the lender must still adhere to very specific procedures that are defined under NRS (Nevada Revised Statue).
Non-Judicial Foreclosure timeline:
Default period
No set time – A lender will typically begin their foreclosure following a default period. Although the Deed of Trust may outline the minimum delinquency period required before the lender may begin to foreclosure, there is no set time in which they must begin to foreclose on your property and may take the lender as little as 30 day to 6 months (or more) to begin the process.
Notice of Default and Election to Sell (NOD)
Timeline Begins – After the initial Default period, the lender must file a NOD with the county recorder’s office located within the county the property is located. Copies of this document must also be mailed to the appropriate parties that have an interest in the property (i.e.: borrower and junior lien holders). Once this document is recorded, the foreclosure process has legally begun. If owner occupied, the lender must also inform the borrower that they are eligible to participate in the Nevada Foreclosure Mediation Program (See: Nevada Foreclosure Mediation Program for more details).
Reinstatement period
35 days following the NOD – The borrower or secondary lender(s) may pay off any delinquent amount and reinstate the loan within 35 days following the recording of the NOD.
Notice of Sale
90 days following NOD – The lender may file with the county recorder’s office a Notice of Sale (NOS), which will indicate the date, time, and place the foreclosure sale will occur.
21 days before sale date – The notice of sale must be posted at three public places and mailed to the appropriate parties. The sale must also be published for three consecutive weeks in an appropriate adjudicated newspaper before the sale may occur.
(Lender must also have recorded either a certificate of completion of the Nevada Mediation program, or certificate indicating that Mediation is not needed. If borrower elects for Mediation, the foreclosure timeline may be extended to allow enough time for the Mediation to occur. See Nevada Foreclosure Mediation Program for more information.)
Sale Date
Once all the timeframes and requirements above have been met, the lender may carry out their foreclosure sale (Trustee’s Sale).
Earliest time lender may foreclose – 111 days from the date the Notice of Default was filed.
Following the non-judicial foreclosure, the lender may still be able to sue the borrower for any deficiency in the amount received from the trustee’s sale. It is recommended you consult an attorney on this matter.
Regardless of which form of foreclosure the lender decides to use (judicial or non-judicial), under NRS 40.430 they can only use one or the other but not both. This is commonly referred to as the “single Action” or “One Action” rule.
Consequences of Foreclosure
In addition to losing the home and possible being sued by the lender, a borrower may also suffer addition consequences if they allow their home to be foreclosed upon. The following are a few examples of how a borrower may be affected in the long term:
Credit
In addition to the impact to a person’s credit score caused by their missed mortgage payments, it is estimated that the actual foreclosure may lower a borrower’s score up to an additional 250 to over 300 points, and may continue to affect their score for over 3 years. In addition, the foreclosure will remain on a person’s credit history for 10 years of more.
Ability to Purchase
Fannie Mae has issued guidelines which determine how long a borrower must wait before they will be eligible to qualify for a Fannie Mae backed mortgage. On a primary residence, a person will be ineligible for a mortgage for a period of 5 years following the foreclosure. The time period on an investment purchase or non-primary home is 7 years following the foreclosure.
Security Clearances
A foreclosure is one of the most problematic issues against a person’s security clearance. For borrowers who currently hold a position or may in the future requiring a security clearance, such as law enforcement, military personal, FBI, CIA, Security, etc. a foreclosure may be cause to have a persons security clearance revoked, and their position terminated.
Current and Future Employment
Many employers now require that they be allowed to review a person’s credit as a requirement for employment. This may be a requirement for being hired, but also as a requirement for continued employment of future promotions.
Tax Consequences
If the lender decides not to pursue the borrower for any deficient amount, the borrower may still have to pay taxes on the remaining amount forgiven. Please consult a CPA or tax professional about the possible tax ramification associated with a foreclosure.
Potential Tax Implication
Mortgage Debt Relief Act of 2007 Q&A
Options to Avoid Foreclosure
Because foreclosures can be very costly for lenders, in almost all circumstances they are likely willing to offer their borrowers alternatives options to foreclosure. The following is a brief list of some, but not all options that may be available:
Repayment Plan – This option is typically available to borrower’s who had suffered a temporary hardship which caused them to become default, but have since been overcome. The lender will typically reinstate the loan and structure all the missed payments and other fees to be brought current over a certain period of time (typically 6 – 12 months depending on length of default).
Loan Modification – The lender makes a permanent change to one of more terms of the loan (interest rate, change from 30-40 year, etc.) in order to create a lower monthly payment.
Making Home Affordable Modification Program
Capitalization – In most cases where the lender is able to offer the borrower a way to keep the home (such as a modification), the lender will also agree to capitalize all the past due payments and additional fees back into the loan. This results in a higher principle balance, but it allows for the payments to be paid over the length of the loan rather than all at once to bring the loan current.
Deed-In-Lieu of Foreclosure – This is simply an agreement where the borrower agrees to hand over deed and ownership of the property to the lender without the lender having to go through the foreclosure process. The lender will typically agree to waive any remaining deficiency against the borrower. Be aware, this option may have the same credit and other consequences as a foreclosure.
Short Sale – If home retention isn’t an option, a short sale can be the next best option for many borrowers. In this option, the lender agrees to allow the borrower to list the property with a local agent, and sell it at or near market value. If the borrower is upside down, then the lender agrees to allow the borrower to sell the property for less than is owed. The term short sale means that the lender is agreeing to take an amount lower that the principle balance on the loan, and is therefore accepting a “short” payoff. Because foreclosures can be very costly for lenders, a short sale will typically result in a smaller financial loss to the lender, and therefore most lenders are very cooperative when it comes to short sales. Although the borrower still loses the home with this option, they avoid almost all of the consequences that they would otherwise suffer in a foreclosure.
Basic Short Sale Q&A
Consequences of Foreclosure Vs. Short Sale
Related Posts:
What Happens to the 2nd Mortgage if the 1st Forecloses
Beware of Home Retention & Foreclosure Scams
Tips for Avoiding Foreclosures
Should you have any questions or need further information,
please don’t hesitate to contact me, (775) 220-1630
Or visit my website: www.SellingHomesinReno.com
Joshua Talayka
NAR designated: Short Sale & Foreclosure Resource
Chase International
Office: 775 850 5900
Toll Free: 877 922 5900
Cell: 775 220 1630
Fax: 775 850 5901
985 Damonte Ranch Pkwy, Ste. 110
Reno, Nevada (NV) 89521
Legal disclaimer: I am not an attorney, tax professional, or credit counselor. The information contained in this article/blog is intended to provide general information on the subject and not to provide any legal, tax, or credit advice. You should not act upon this or any information without first seeking independent tax and/or legal counsel.
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