Effective June 10, 2019, Nevada AB393 (the “statute”) adds foreclosure restrictions and a pre-foreclosure notice requirement concerning the rights of federal, state, and tribal workers who may be affected by a government shutdown (“affected worker”). The statute was passed and is effective as of June 10, 2019, without any language as to retroactive effect. The statute imposes new notice requirements which concern the effects of a government shutdown. “Shutdown” is defined as any period in which there is a lapse in appropriations for a federal or state agency or tribal government that continues through any unpaid payday for a federal worker, tribal worker or state worker employed by that agency or government.
Upon receipt of proof that a borrower is an affected worker, the statute prohibits conducting a foreclosure sale during the period commencing on the date that a shutdown begins and ending on the date that is 90 days after the date on which the shutdown ends, if a mortgagor or grantor of a deed of trust under a residential mortgage loan is a federal worker, tribal worker, state worker or, in certain circumstances, a household member or landlord of such a worker affected by a shutdown. The statute also authorizes a court to stay foreclosure proceedings for a certain period or issue an order that conserves the interests of the parties unless the court determines that the ability of the federal worker, tribal worker, state worker or household member or landlord of such a worker to comply with the terms of the obligation secured by the residential mortgage loan is not materially affected by the shutdown.
The statute provides that any person who knowingly conducts a foreclosure sale in violation of its provisions is guilty of a misdemeanor and is liable for actual damages, reasonable attorney’s fees and costs incurred by the injured party. This protection against foreclosure is similar to that provided in existing law to a servicemember on active duty or deployment. (NRS 40.439) Existing law requires that a servicemember receive notice of such protections before a notice of default and election to sell is recorded for a trustee’s sale or before the commencement of a civil action for a foreclosure sale. (NRS 107.500) The statute extends this requirement to provide notice of the similar protections to a federal worker, tribal worker or state worker or household member or landlord of such a worker in relation to a shutdown.
Required Addition to Foreclosure Notice (NRS 107.500)
For foreclosure, the statute adds a thirty-day notice requirement to NRS 107.500, which applies to owner-occupied residential property. Servicers already send a letter required by NRS 107.500 before initiating foreclosure by recording a Notice of Default (“NOD”), so the language should be added to this letter template. The letter must be sent at least 30 calendar days before recording a notice of default and election to sell. The notice must state that if the borrower is a federal worker, tribal worker, state worker or a household member or landlord of such a worker, he or she may be entitled to certain protections under this act, including the foreclosure prohibition spelled out above.
Foreclosures Already Initiated On or After June 10, 2019
For foreclosures already initiated by a Notice of Default on or after June 10, 2019 without the newly required notice, strict compliance would require rescinding those NODs, mailing the new notice, and waiting 30 calendar days before recording a new NOD.
However, where a borrower has elected foreclosure mediation pursuant to an NOD in this posture, a servicer may choose to not rescind, as that can create additional problems and costs associated with the foreclosure mediation. For those loans a servicer may choose to discuss waiver of this requirement with borrower and its counsel, or to substantially comply with the new notice requirement by sending a “gap” letter including the new notice as required by the statute, and allowing for at least 30 calendar days prior to a sale being set. This will comply with the spirit of the statute in providing notice and allowing for the statutory notice timeframe to pass, precluding any claims of harm or prejudice. This 30-day period will run concurrently with the statutory 90-day NOD period. Mediation will cause more than 30 days delay in any case.
If a servicer is not comfortable with this recommendation, it can rescind any NODs recorded on or after June 10, 2019, and re-start after sending the notice and waiting 30 days in order to strictly comply with the new law.
Any gap letter, and all future notices should be sent via first class mail. NRS 107.500 provides: “the mortgage servicer, mortgagee or beneficiary of the deed of trust shall mail, by first-class mail, a notice addressed to the borrower at the borrower’s primary address as indicated in the records of the mortgage servicer, mortgagee or beneficiary of the deed of trust …”
Please contact our Nevada Managing Litigation Attorney, Shadd A. Wade, Esq., if you have any questions concerning this bill.
Shadd A. Wade, Esq. | ZBS Law, LLP
Managing Litigation Attorney – Nevada
(702) 948-8565 Ext. 606