David Gorka, head of Black & LoBello’s Submission and Processing department, answers some common questions clients have regarding the document submission process when dealing with a short sale and the lenders involved.
The Nevada Association of Realtors (hereinafter “NVAR”) recently released a report entitled “Face of Foreclosure.” This report paints a rather grim picture. It reports that more than 20% of Nevada homeowners have strategically defaulted and allowed a foreclosure to occur rather than pursuing other alternatives.
The NVAR report explored the reason that people went to foreclosure as opposed to seeking other financially distressed property alternatives such as a loan modification or short sale. Apparently, many Nevadans are unaware of programs available to assist them in the aforementioned pursuits. However, the report does not seem to adequately address one major reason that homeowners throughout Nevada are walking away. It seems rather clear that for some, the fear of being pursued on a deficiency judgment may be a major factor in the decision making process.
In Nevada, deficiency judgments can be incredibly burdensome as the property values have dropped dramatically over the last several years. If a borrower presents a short sale, making every attempt to mitigate losses incurred by the lender, they are often provided with an approval letter that does not afford a deficiency release. Accordingly, for loans originated prior to October 2009, the lender may pursue the borrower after a short sale for six years. If the borrower instead allows the property to be foreclosed upon, the foreclosing lender only has six months to pursue them. Inasmuch as most people do not like a dark cloud that looms for six years, if the lender forecloses, that dark cloud may be eliminated in a six month period. That being said, it is still advisable to work with your lender and make every attempt to mitigate the damages for all parties while making them aware that a release of the debt in its entirety is of utmost importance. Therefore, for Nevadans to know all their options it is still best to seek the counsel of a trusted source who will properly advise as to the laws and procedures available in this state.