The tough fight that the Nevada Association of REALTORS® won for a new law protecting distressed homeowners is now gaining national attention. This law (AB273) is intended to prevent banks from “double dipping” and going after home owners for mortgage payments once a settlement between the borrower and lender has been reached.
“Nevada may be the only place in the United States to beat the banks by passing a law that helps homeowners at their expense, and at the expense of the bill collectors to whom they sell deficiency judgments,” says NVAR President Mike Young.
The Nevada Legislature also took steps to protect home owners from having to pay the full amount owed after a foreclosure when the bank has already collected insurance payments on the loan. The new law states that the lender will not be allowed to collect from both the insurance company and the home owner. This protects home owners who were able to work with their lender to prevent their home from foreclosure, but were ultimately unable to save it.
The law also reduces the amount of time junior lien holders (typically banks) have to file for a deficiency from the current six years to six months. It will also cap the amount a third party can be awarded if they bought the right to the deficiency for pennies on the dollar. (Oftentimes a lender will sell the note during the short-sale process for less than what the borrower owes and then the agency that buys this note will try to go after the borrower for the full amount.)
“Although consumers are not relieved of their financial obligations in any way under this legislation,” says Young, “it does ensure that they will be able to deal with the issue promptly, and then be able to move on with their lives, instead of having to look over their shoulders for the next six years waiting for a debt collection company to stalk them in pursuit of the mortgage deficiency.”