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    The "Consideration" Limit on Deficiency Judgments and Why It Matters

    New legislation makes it clear that Nevada has a "consideration limitation" on the amount that a lender can seek in a deficiency action following a foreclosure sale. This article will explain that limitation.

    Reports have shown that as many as 85% of residential mortgages in Las Vegas have been "underwater," meaning that the value of the home is less than the debt. The numbers are almost as bad for commercial loans. When you couple this with the poor employment numbers and the decline in income among the employed, tens of thousands of people have lost their home and their business investments through foreclosure.

    After the foreclosure, the individual homeowners and the guarantors of commercial loans are still not out of the woods. They face the litigation that comes when the lender sues them for a deficiency judgment.

    In a large majority of these cases, the lender filing suit is not the original lender. Instead, they purchased the rights under the note, often for pennies on the dollar. Yet, when they file suit for the deficiency, they are basing it on the full face value of the note.

    The 2011 Nevada Legislature concluded that such excessive and unreasonable profiteering by successor-creditors was exacerbating the foreclosure crisis and impeding Nevada’s economic recovery. As a result, they sought to put an end to this.

    Among other things, they imposed a consideration limitation on the amount of a deficiency judgment. As a result, a deficiency is limited to the amount by which the consideration paid exceeds the fair market value of the property. Also, the legislation was made effective immediately, so that it would apply to any deficiency judgments awarded on or after the effective date, which was June 10, 2011. The idea was to provide help to Nevadans for this economic crisis, not some hypothetical crisis in the future.

    Since most of the initial lenders disposed of their loan portfolios, generally at large discounts, most deficiency cases, or threatened cases, are impacted by this limitation. As a result, this legislation can help you if are facing the threat of a deficiency judgment.

    Not surprisingly, the lender lobby is trying to overturn the legislation, and our firm is handling one of the two cases that are in front of the Nevada Supreme Court, which are scheduled for argument on October 1, 2012.

    As part of our desire to share information with you about these cases, we have posted a copy of a brief that we filed in connection with the Nevada Supreme Court case. This brief was filed in opposition to the lender’s motion to strike any references to the Statement of Intent that had been published by Assemblyman Marcus Conklin, the sponsor of the bill. In our brief, we refute the various lender arguments that were made to misconstrue the intent of the legislature. You can read the Opposition to Motion to Strike by clicking here: http://foleyoakes.com/nevadalaw/deficiency-judgments-in-nevada/ 

    We think these arguments put to bed any notion that the law was intended to be narrowly applied or that it should apply only in the future. The obvious intent of the Legislature was to provide broad relief to all Nevadans now.

    If you are in a position where you could be affected by this law, we may be able to help you, so we invite you to contact our office and set up an appointment.


    Are You Being Threatened With A Deficiency Judgment?

    On October 1, 2012, our firm will be arguing a case before the Nevada Supreme Court that is likely to affect the tens of thousands of Nevadans facing the threat of a deficiency judgment following the loss of their home or real estate investments.

    A large number of primarily out of state investors have made it their business to buy secured loans at massive discounts, foreclose on the real property, and then sue the borrowers and guarantors for a deficiency, based on the full amount of the loan. In 2011, the Nevada Legislature determined that this practice was having a detrimental impact on the economic recovery of the State. They sought to put an end to that practice through the passage of AB 273. Thus, under current law, a lender seeking a deficiency is limited to the amount of consideration paid for the loan, minus the fair market value of the property. If the fair market value of the foreclosed property exceeds the amount paid for the loan, there is no deficiency.

    This remedial statute governs all deficiency judgments awarded on or after the effective date, which was June 10, 2011. It was given this immediate effect in order to help Nevadans recover from this current economic crisis.

    Not surprisingly, those institutions seeking to profit from this practice would like to see the statute defeated. They have argued that the statute should not apply to existing cases, but should only come into play in the future. They have made various other arguments as well.

    The Nevada Supreme Court has scheduled two cases for oral argument on October 1, 2011. It is expected that those two cases will decide all of the issues that have been raised by the lender lobby in an effort to defeat the intent of the Nevada Legislature. Our firm is pleased to be representing the guarantors in one of those cases.

    Since this issue is so important to so many Nevadans, we will continue to keep you informed as to any developments in thes two important cases, and will also share with you some of the briefing that has been done in arguing these cases. Of course, if you are facing a threat of a deficiency judgment, we would be happy to help you with your case.


    Avoiding Drink Drivers

    Intoxicated drivers get behind the wheel every day, putting ourselves and our loved ones in danger. To stay out of harm's way, it's important to learn how to spot a drunk driver on the road. Mothers Against Drunk Driving (MADD) gives us a checklist for spotting drunk drivers, and being vigilant on the roads. You can help protect your family from drunk drivers by looking for these signs of intoxication among other motorists:

    • Quick acceleration or deceleration
    • Tailgating
    • Weaving or zig-zagging across the road
    • Driving anywhere other than on a road designated for vehicles
    • Almost striking an object, curb, or vehicle
    • Stopping without cause or erratic braking
    • Drifting in and out of traffic lanes
    • Signaling that is inconsistent with driving actions
    • Slow response to traffic signals (e.g. sudden stop or delayed start)
    • Straddling the center lane marker
    • Driving with headlights off at night
    • Swerving
    • Driving slower than 10 mph below the speed limit
    • Turning abruptly or illegally
    • Driving into opposing traffic on the wrong side of the road

    If you see a motorist engaging in any of the above driving habits, stay as far away from the other vehicle as possible. Never try to pass the vehicle or signal the driver to pull over.  Doing so could result in a collision. Try if you can to take notice of the license plate number of the driver along with details of the vehicle including make, model and color. Remember to never compromise your own safety trying to obtain this information. Finally, pull over to call 911. Give the location of the vehicle, including the name of the road or cross streets and the direction the vehicle is traveling, and a complete description of the vehicle and the manner in which the vehicle is being driven.

    Stay aware on the roads, and keep your family safe. Thanks to MADD for the info. 


    Low Speed Collisions 

    Thousands of low speed collisions occur every day. In fact, research shows that the majority of auto accident claims occur at speeds as low as 12 mph. However, what you may have considered a "fender bender" may actually be causing you serious injury. While insurance companies and defendants may attempt to dismiss a claim if they believe the speed is too slow for an injury to occur, injuries can exist from accidents at any speeds. How fast does a vehicle have to be going for whiplash to occur? Here is the truth about low speed accidents.

    Studies have simulated a rear collision on human test subjects and recorded the results with high speed motion x-rays. All studies have shown that the neck was injured fractions of seconds before the victim realizes there has been a collision because he uses reflexes to prepare for impact. This event can occur at speeds as low as 2.5 mph.

    Additionally, modern car bumpers are designed to not show damage from speeds under 5 miles per hour. These standards were adopted to reduce repair costs for insurance companies, and the tests measured vehicle-to-barrier damage, not vehicle-to-vehicle damage. When the crash involves two cars, it takes considerably more force to cause visible bumper damage than a 5 mph collision with a barrier. Some tests have even shown that cars could be crashed repeatedly at 20 mph and not show outer damage. However, it is highly probable that your neck will be injured, although you may not feel it for hours or days, and your bumper may not even show a dent.

    Read more about low speed collisions here. If you are injured in a car accident, contact Foley & Oakes at (702) 384-2070.


    Mechanic's Lien vs. Deed of Trust

    A mechanic's lien is a security interest in the title to property for the benefit of those who have supplied labor or materials that improve the property. With the unprecedented decline in land values these days, a mechanic’s lien claimant’s ability to get paid will hinge upon whether the lien claimant can obtain priority over other indebtedness that is secured by a deed of trust or mortgage against the same property and improvements. In Nevada, there are certain situations where the lien claimants can obtain that priority, even though the mortgage or deed of trust was recorded prior to the recordation of the mechanic’s lien. This is known as “priming" the mortgage or deed of trust.

    Given the potential for “priming” the mortgage or deed of trust, it's now as critical as ever that the lien claimant find out the status and amount of indebtedness secured by the property that is subject to the lien, and determine whether there's any basis to establish a case for "priming.” Here is some important information regarding this type of claim: 

    • Under Nevada law, a valid mechanic’s lien has priority over any mortgage or deed of trust "which may have attached to the property after the commencement of construction of the work on improvement."
    • "Commencement of construction” means the date on which either work performed or materials or equipment furnished in connection with a work of improvement, are visible from a reasonable inspection of the site.
    • Preliminary work items, such as installation of a fence or leaving a dumpster on-site may be sufficient to establish that commencement of construction would have been “visible from a reasonable inspection of the site.”
    • The definition of "improvement" includes numerous categories, including the demolition or removal of existing improvements, trees, or other vegetation, the drilling of test holes, grading, grubbing, filling, or excavating, constructing or installing sewers or other public utilities, a system for irrigation, plants, sod or other landscaping, and various other categories of work.

    As you can see, it's important for any mechanic's lien claimant who is seeking recovery for work performed to seek legal help. You can reach our attorneys at (702) 384-2070. For more reading information, click here.