At Howard Law, P.C., our Riverside foreclosure defense lawyers represent Californians who are facing foreclosure or were deceived by their lenders at some point. Because we work in California, we don't always have to worry about deficiency lawsuits, which seek to extract from former homeowners the balance due after the home is sold and the bank recoups what it can from its investment. California law makes certain homeowners immune, but if you've ever refinanced, it's still an issue. There's even less protection in other states, and in First National Bank of Omaha v. Davey, the Nebraska Supreme Court found that state law didn't protect Scott and Deborah Davey from a deficiency lawsuit. The district court had dismissed the lawsuit as untimely, but the high court found the deadline didn't apply.
The Daveys took out their mortgage in 2009, securing the loan with a trust deed on the property. They soon defaulted, however, and there followed a judicial foreclosure. The property was sold at sheriff's sale in April of 2011, and confirmed the next month. Because the proceeds from that sale didn't cover all of the Daveys' debt, however, First National filed a deficiency lawsuit against them 99 days later, to recover the balance. In their answer, they cited a Nebraska state law that gives banks 90 days to file a deficiency lawsuit after a judicial foreclosure. The trial court agreed after a hearing.
The law in question is the Nebraska Trust Deeds Act, which authorizes the use of a trust deed as a security device in Nebraska. This is a common legal scheme in many states for mortgages. The Act includes procedures that permit the property securing a defaulted loan to be sold non-judicially, by a trustee. The Act also permits a deficiency action like this one, but provides a three-month deadline to sue. Thus, the high court said, it necessarily follows that the deadline applies to trustee's sales and not to judicial foreclosures. On appeal, First National made this argument, and said its statute of limitations should be Nebraska's general five-year deadline for enforcing written contracts. The high court agreed, citing specific language: "At any time within three months after any sale of property under a trust deed..." Indeed, it noted, the three-month deadline would be difficult to meet after judicial foreclosures, considering that judicial foreclosure sales need to be confirmed by the court. And because this action was brought within five years of a judicial foreclosure, the high court said, it is not time-barred.
Vincent Howard and our Yorba Linda foreclosure defense attorneys dislike deficiency lawsuits in general. After all, if the borrowers could not pay their monthly mortgage payment, it's unlikely that they would be able to pay a legal judgment for the much higher balance of the loan. Lenders may be willing to settle for less. Or, if bankruptcy is a reasonable option for your circumstances, it's possible that a bankruptcy could leave the lender with nothing. And if you want to defend the lawsuit in court, you can often argue that the lawsuit is untimely, that the lender should go after your private mortgage insurance provider, and more. If you'd like to talk about your options with an experienced attorney, call Vincent Howard and his team of San Bernardino County foreclosure defense lawyers today.
Led by Vincent Howard, Howard Law represents Californians who are facing foreclosure or bankruptcy, or have been victims of bad faith when taking out a loan or negotiating a loan workout. If you'd like to tell us about your case and learn more about your legal options, send us an email today or call 1-800-872-5925.