Change to Nevada Law Prohibits Deficiency Judgments

Nevada currently provides for the right of a foreclosing lender on real estate to pursue a deficiency judgment against the borrower on any type of property including a primary residence. Nevada is known as a full recourse state.  The law provides for a six month period following the trustee’s sale in which the lender may file an action against the borrower to recover amounts owing.

Nevada becomes a nonrecourse state for new loans made starting October 1, 2009, for the purchase of residential property that is owner occupied.  Thus the lender may no longer pursue a deficiency judgment against the borrower on such property.  Although some may consider this the equivalent of sending life boats and vests to the Titanic days after the sinking, it is a significant development in Nevada real estate law.

For the new law to apply the following requirements must be met:

  1. The  property is a single-family residence;
  2. The loan was used to buy the property;
  3. The borrower continuously occupied the property as a principal residence after the loan was made;
  4. The original loan was not refinanced;
  5. The loan was made by a financial institution.

Robert B. Noggle, Esq.


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