Intro to Foreclosures
A mortgage foreclosure is the legal process that can happen when a person borrows money from a bank or lender to buy a home. In exchange for the loan, the lender holds a lien against the property. If the borrower misses payments, the loan goes into default, and the lender can sell the property to pay off the loan—a “mortgage foreclosure.” Continue reading to learn the basics of a mortgage foreclosure in Nevada and the answers to some frequently asked questions.
***FYI! If you have questions about evictions related to foreclosure--for example, because you are a tenant renting a foreclosed home, or maybe because you are a former homeowner who has lost a home to foreclosure and are being evicted--click to visit our Eviction Issues Related to Foreclosure page. There you can find information about tenants' rights and landlords' obligations in foreclosures and about the eviction process for both tenants and former homeowners.
In Nevada, mortgage foreclosures can take place “judicially”—by going to court—or “non-judicially,” by having a third party (the “trustee”) sell the property for the lender. Most mortgage foreclosures in Nevada are non-judicial foreclosures.
The laws governing Nevada foreclosures are in Title 9, Chapter 107 of the Nevada Revised Statutes (“NRS”) and the foreclosure mediation rules are known as the Nevada Foreclosure Mediation Rules (“FMR”). While this page will be helpful to you in understanding the procedure, you might consider consulting with Legal Aid Center of Southern Nevada or hiring a private attorney before making any big decisions in relation to your home. The explanations below are only intended as a simplified, starter guide for homeowners in understanding the mortgage foreclosure process.
What do these words mean?
Several terms are commonly used during the foreclosure process, and several words are often interchanged depending on who is speaking with you. Here are some terms to know:
1. Homeowner: This is the person who bought the house via a mortgage. The homeowner is sometimes also called the borrower, the mortgagor, the trustor, or the grantor.
2. Lender: This is the entity, usually a bank, who loans the money to the homeowner so that the homeowner can purchase the home. The lender is also sometimes called the beneficiary, the mortgagee, or the grantee.
3. Deed of trust. A deed of trust is a document that identifies the homeowner and the lender, the loan amount, the specific terms of the loan, and the property description of the home that the borrower is purchasing. The deed of trust also identifies a third-party trustee (see below for “trustee” definition). Under the terms of the deed of trust, the trustee holds on to the title of the property until the loan is paid off. When the loan is paid off, the trustee will return title of the home to the borrower. Deeds of trust also give power to the trustee to sell the property if the borrower falls behind on loan payments. Technically in Nevada, we use deeds of trusts more often than mortgages, but the term “mortgage” is the conversational term more commonly used. On these pages, we will refer to your home loans, payments, and your deed of trust as a mortgage.
4. Mortgages. In a mortgage, a homeowner signs a promissory note promising to pay back the loan to the lender within a certain period of time of the purchase of a home. The homeowner and the lender also sign a mortgage instrument, which says that the lender has a lien on the home until the loan is paid off. When the loan is paid in full, the lien goes away. If the homeowner falls behind on loan payments, the lender can sue the homeowner for the money owed or foreclose on the property and obtain a judgment for the difference between what was owed and the amount of the sale price (the “deficiency”). Conversationally, most of us refer to home loans and payments as mortgages whether the home loan was under a “deed of trust” or a “mortgage.” Because of this, we will be using the term “mortgage” throughout these pages.
5. Trustee. This is the third party identified in the “deed of trust” as the person having the power to sell the property in foreclosure. Generally, title and escrow companies act as trustees. The trustee is the designated party who holds on to the property until the home loan is paid in full under a deed of trust. Once the home loan is paid in full, the trustee returns title of the house to the homeowner. You will also see that the trustee can sell the house if the homeowner defaults on mortgage payments.
6. Mortgage Servicer. This is the company that manages your mortgage account and collects your payments for the lender. The mortgage servicer usually keeps an accounting of your monthly payments and normally pays the taxes and homeowners insurance on the property. Sometimes it is the same company as the lender; sometimes it is an entirely different entity.
7. Default: Default happens when a homeowner gets behind on monthly payments to the lender as agreed in the loan terms.
8. Mediation: Mediation is a process in which opposing parties meet with a neutral third party (called a “mediator”) to try to reach a mutually agreeable solution. Foreclosure mediation is a specific type of mediation where you and your lender will meet to see if you can come up with a solution to avoid foreclosure so that you can stay in your home.
9. Loan modification: A loan modification is when you and your lender agree to change the original terms of your mortgage. This might mean a lower monthly mortgage payment, a lower interest rate, an extension of the payoff date for the loan, and/or forgiveness of part of the loan balance.
How does mortgage foreclosure work?
Most lenders in Nevada use a "non-judicial foreclosure" process (sometimes called "sale under a deed of trust") under Chapter 107 of the Nevada Revised Statutes. "Non-judicial" means that your lender does not have to go to court to foreclose on your mortgage. Your lender simply has to follow the steps outlined in the statute.
If you purchased your home in Nevada, your home loan is most likely subject to the terms of a “deed of trust.” Under the terms of the deed of trust (which you signed when you obtained the home loan), the trustee holds a "power of sale" in the event that you default. You are given an opportunity to cure by catching up on the payments and paying the late fees. But once you go into default and stay in default, the lender can foreclose, sell your home, and evict you.
In order to foreclose, the trustee must first:
- Wait until you are in default—for example, missed several payments.
- Wait until after your servicer has contacted you about your right to try foreclosure prevention alternatives. At this point, the servicer should have sent to you a summary of your overdue account. This summary is important because it should include a lot of information about your loan, including the total amount necessary to cure the default and make it current, the total amount owed under the loan, the date of your last payment, the current interest rate, a description of the late fees, and a phone number or e-mail address for contacting the lender. (NRS 107.500; NRS 107.510(2) & (5).)
- Deliver a Notice of Default and Election to Sell to you by registered or certified mail, post a copy on the property, and record the notice with the Clark County Recorder. (NRS 107.080.)
- Deliver to you by registered or certified mail a notice from Home Means Nevada about your right to petition the court for foreclosure mediation assistance. (NRS 107.086(2)(a)(4)). If you have received the Notice of Default and the notice from Home Means Nevada, and you are interested in participating in mediation, click here for the steps and procedure.
- If you do not choose to participate in mediation (or you elect to waive it), Home Means Nevada will issue a Certificate of Foreclosure sixty to ninety days after service of the Notice of Default. After the Certificate is issued, the trustee can move forward with foreclosure. If you do participate in mediation, but cannot agree to a solution with the lender, then Home Means Nevada will also issue a Certificate of Foreclosure, allowing the trustee to move forward with foreclosure. (NRS 107.086(8).)
- After the Certificate issues–if you have not cured the default by paying all amounts due–the trustee will send you a Notice of Trustee's Sale by registered or certified mail, stating the date, time, and place of the sale (for example, "On Wednesday, February 5, 2018 at 10:00 a.m. on the courthouse steps"), and record the notice with the Clark County Recorder. (NRS 107.080(4), 107.087.)
- Post the Notice of Trustee's Sale in three public places for twenty consecutive days and run the notice in the newspaper (generally a legal newspaper) for three consecutive weeks. (NRS 107.080(4).) (Because of these requirements, the sale date is usually at least three weeks after the notice of sale.)
Once you receive the Notice of Default and Election to Sell and waive mediation, the sale will happen in approximately 111 days (three months plus three weeks). The foreclosure is actually done by the trustee rather than the bank that holds the mortgage; so notices do not come from the bank but from a third party who you may not recognize.
Although not as common, a lender could also file a foreclosure lawsuit with the court (sometimes called a "judicial foreclosure") rather than use the "non-judicial foreclosure" process. An action for judicial foreclosure is like any other court case in many ways. In a judicial foreclosure case, the lender can ask the court to force the sale of the property and enter a money judgment against you for whatever amount is still owed on your loan after the sale. If your lender is using the judicial foreclosure process, a process server will serve you with a summons and complaint, to which you can then respond.
How does the lender or other new owner take my home from me?
At the foreclosure sale, the lender (or someone else) purchases your home from the trustee and gets the title. If you are still physically in the home after the sale date, the lender or other new owner can serve you with a three-day notice to leave. (NRS 40.255.) If you stay on the property after three days, the lender/owner can serve you with a summons and complaint asking the court to evict you. Click to visit Evicting a Former-Owner After Forclosure for more information.
What can I do if I am facing foreclosure?
Do not wait! If the process has gone too far, it may be too late to stop foreclosure of your home.
1. If you received a Notice of Default within the last thirty days or you received a Complaint for Judicial Foreclosure within the last twenty days, and you are interested in participating in foreclosure mediation, visit the Petition for Foreclosure Mediation Assistance page for a step-by-step guide.
2. Call your lender or mortgage servicer and ask for assistance. Most lenders have programs to work with homeowners to modify loans. Start early, because it may take several weeks to process a request.
3. For homeowners who meet certain income guidelines and need legal representation, Legal Aid Center of Southern Nevada staff attorneys or pro bono private attorneys may be able to represent you. Click to visit the Legal Aid Center of Southern Nevada website to learn more about programs and services.
4. Visit the Foreclosure & Foreclosure Mediation Resources page for a list of referrals in Nevada.
Should I hire a lawyer or a "save your home" service?
Maybe, but first be beware of scammers! The Notice of Default is a public record, and anyone can access the information. Be cautious about offers to help you refinance or modify your loan. Many of them are fraudulent.
Click to visit the Legal Aid Center of Southern Nevada website to learn more about free programs and services.
Who can I talk to about modifying my mortgage?
Under Nevada law, when the trustee mails you the Notice of Default and Election to Sell, the trustee must include with the notice the contact information for a person with authority to negotiate a loan modification, along with contact information for at least one local housing counseling agency approved by the U.S. Department of Housing & Urban Development (“HUD”). (NRS 107.086.) The trustee must also post a notice on the property that provides the contact information of the trustee or the person conducting the foreclosure who is authorized to provide information relating to the property’s foreclosure status. (NRS 107.087.)
If you have not received a Notice of Default and Election to Sell, you can speak with your mortgage servicer. The mortgage servicer’s contact information is on your monthly mortgage statement.
How can I obtain more information about foreclosure mediation?
For a step-by-step guide on enrolling in the foreclosure mediation program, visit the Petition for Foreclosure Mediation Assistance page. Otherwise, the Nevada Supreme Court has adopted rules and model forms governing the Nevada Foreclosure Mediation Program, all of which are available online. Click to visit the Legal Aid Center of Southern Nevada website or the Home Means Nevada website for more information regarding foreclosure mediation.
How does foreclosure mediation work?
Mediation is a form of dispute resolution. Two opposing parties meet with a neutral third party (the mediator) who helps them try to reach a voluntary and mutually acceptable solution or agreement.
If you petition for foreclosure mediation assistance within the appropriate time, the lender may not foreclose until mediation has been completed. Once mediation is scheduled, the actual mediation meeting is fairly fast (less than four hours), inexpensive ($500, paid equally by the parties), and more flexible than more formal processes. The goal of the program is to make foreclosure the last resort for the lender.
If you are interested in participating in the foreclosure mediation program, visit the Petition for Foreclosure Mediation Assistance page for a step-by-step guide on how to enroll. In short, you will file a Petition for Foreclosure Mediation Assistance at the district court clerk’s office, pay a $250.00 mediator fee and a $25.00 filing fee, then mail copies of your petition to the lender, trustee, and Home Means Nevada. If you timely file the petition, no further action can be taken to sell your home until completion of the mediation. (NRS 107.086.)
After filing your petition, you will receive a notice appointing a mediator. The mediator will arrange a time and place for the mediation. The mediator will send you a scheduling notice explaining what documents you must produce and how to exchange them with your lender before the mediation.
Three parties will be present at the mediation: you, the lender, and the mediator. Both you and the lender must negotiate in good faith regarding alternatives to foreclosure. Usually, alternatives to foreclosure include (i) loan modification or repayment plan, (ii) short sale or (iii) giving the property up (a “deed-in-lieu”). You will tell them what you want and show them what you can afford. If you reach an agreement, the mediator will help you outline the terms of the agreement.
The mediator will issue a Mediator’s Statement within ten days of conclusion of the mediation. Within ten days of that statement, either side can submit a request or an objection. The District Court judge then enters an Order that reflects the terms of the loan modification if one was reached, and the new terms under the loan modification will begin. If no loan modification or other agreement was reached, the judge will dismiss the case. The order dismissing the case will be served on Home Means Nevada, who will then issue a certificate to the trustee to proceed with the foreclosure.
The flowchart below shows how the Foreclosure Mediation Program works. To download a flowchart, click on the link below.
Flowchart - Foreclosure Mediation Program