Legal Ease, vol 3

logo-black-lobelloHomeowners and Deficiency actions limitations to third parties

The Supreme Court in a recently decided case, First Financial Bank, N.A. v. Gordon R. Lane, et al., 130 Nev. Adv. Op. 96 (Dec. 2014), clarified NRS 40.451, but more importantly, fortified NRS 40.459(1)(c) and their decisions Sandpointe Apartments v. Eighth Judicial Dist. Court, 129 Nev. ___, ____, 313 P.3d 849, (2013). This is a summation of the Court’s ruling.

In First Financial Bank, N.A., the Court addressed the second sentence of the statute NRS 40.451 and what it means and how it is applied. This is relevant for any foreclosure sales prior to the enactment of NRS 40.459(1)(c) in 2011.

NRS 40.451 states:

As used in NRS 40.451 to 40.463, inclusive, indebtedness means the principal balance of the obligation secured by a mortgage or other lien on real property, together with all interest accrued and unpaid prior to the time of foreclosure sale, all costs and fees of such a sale, all advances made with respect to the property by the beneficiary, and all other amounts secured by the mortgage or other lien on the real property in favor of the person seeking the deficiency judgment. Such amount constituting a lien is limited to the amount of the consideration paid by the lienholder.

The last sentence, “Such amount constituting a lien is limited to the amount of the consideration paid by the lienholder [.]” has recently come under scrutiny as to its meaning and interpretation given the change in the economy and number of foreclosures, sales of deeds of trusts, federal government takeovers, HUD takeovers, FDIC takeovers and subsequent sales to third parties of the notes and deeds of trust at discounts from face value. For the purposes of this article, I will refer to the deed of trust beneficiary as the “Bank”.

As an example, if you purchased a home and financed it through Bank A (original beneficiary), who sells it to Bank B (assigned beneficiary) at a discount off the amount due originally to Bank A, prior to 2011 a question existed as to whether Bank B could collect the face value of the note or if Bank B was limited to what it paid Bank A. Essentially, the Appellant in First Financial Bank, N.A., argued that the last sentence of NRS 40.451 meant that the Bank could not collect on any amounts that were not actually paid out by Bank A or Bank B on behalf of the homeowner. The Respondent argued that the last sentence meant that if the original note was ten dollars, but Bank B purchased it for eight dollars, the most that Bank B could collect at foreclosure was the eight dollars.   The Supreme Court sided with the Appellant, going through a detail of the enactment of the statute, comments made during the enactment in the legislature and statutory construction. Essentially the last sentence is a modifier to the past portion of the first sentence of NRS 40.451, “and all other amounts secured by the mortgage or other lien on the real property in favor of the person seeking the deficiency judgment.”

The Court reasoned that the last sentence, although sits by itself, it references the word “lien”. Further, pursuant to statutory construction that second sentence would modify that portion of the preceding sentence with the word “lien” only. The Court found that although “lien” is mentioned twice in the preceding sentence, when the statute was originally enacted in 1969, the word “lien” only appeared in the last portion. In 1989, the statute was grammatically corrected and the word “lien” was added in the first part of the first sentence. As a result, the only portion of the preceding sentence that the second sentence could refer to and modify is the last portion and as a limitation to those amounts (This is a simplified version of the Court’s opinion).

More importantly, the court further bolstered its opinion in Sandpointe Apartments. It went on to state that if the last sentence of NRS 40.451 was interpreted as the Respondent had hoped, that is to mean that Bank B could only recover the eight dollars (in my example), it would make NRS 40.459(1)(c), enacted in 2011, unnecessary and repetitive.

NRS 40.459(1)(c) states:

1) After the hearing, the court shall award a money judgment against the debtor, guarantor or surety who is personally liable for the debt. The court shall not render judgment for more than:

(c) If the person seeking the judgment acquired the right to obtain the judgment from a person who previously held that right, the amount by which the amount of the consideration paid for that right exceeds the fair market value of the property sold at the time of sale or the amount for which the property was actually sold, whichever is greater, with interest from the date of sale and reasonable costs,… (in pertinent part).

The Court reiterated its ruling in Sandpointe Apartments, and stated that clearly, after 2011, when NRS 40.459(1)(c) was added, the intent was to limit Bank B from obtaining more than they paid for the note and deed of trust when purchased from Bank A.

If any question existed as to the interpretation of NRS 40.451 and 40.459(1)(c), it has been settled by the Court in First Financial Bank, N.A.. Further, in footnote 1 of First Financial Bank, N.A. the Court indicates that the date of the application of NRS 40.459(1)(c) is the date of the actual foreclosure sale date. As a result, the Nevada Supreme court has established that pursuant to NRS 40.459(1)(c), a third party may only recover the amount they paid for the note and deed of trust, and further, the date for applicability of NRS 40.459(1)(c) is the date of the actual foreclosure sale.

Word on the Street, vol 3

logo-glvarGLVAR report points to steady housing market, prices still up about 8 percent for year

Statistics released Tuesday by the Greater Las Vegas Association of REALTORS® (GLVAR) offer more proof of an increasingly stable local housing market, with Southern Nevada home prices remaining about 8 percent higher than they were a year ago.

GLVAR reported the median price of homes sold through its Multiple Listing Service during
February was $205,000. That was up 2.5 percent from an even $200,000 in January, and up 7.9 percent from one year ago. Meanwhile, the median price of local condominiums and townhomes, including high-rise condos, sold in February was $105,000, unchanged from January and December and up 2.1 percent from one year ago.

“These slight variations in median sales price reinforce what we’ve been saying for months,” said 2015 GLVAR President Keith Lynam, a longtime local REALTOR®. “We’re in a stable housing market, which is a good thing.”
At the same time, Lynam said overpriced listings may be holding back the local housing market.
“We’d like to see more Nevada homeowners realistically pricing their homes at fair market
value,” he said. “One of our challenges lately is too many would-be sellers have been watching home prices go up for the past few years and are now asking too much for their homes. We need to keep educating homeowners and our members about this to make sure homes are being listed at realistic prices. Certainly some of the blame should be squarely placed on our members, but the trend of homes on the market with no offers is rising, and that is troubling.”

GLVAR’s median single-family home price increased by about 10 percent during 2014, entering a stabilizing period for Southern Nevada’s real estate market. That annual rate of appreciation is less than half of what it was when prices increased by about 24 percent per year during both 2012 and 2013, Lynam added.

According to GLVAR, the total number of existing local homes, condominiums and townhomes sold in February was 2,452, up from 2,239 in January, but down from 2,518 one year ago. At this sales pace, Lynam said Southern Nevada continues to have roughly a four-month supply of available homes, while a six-month supply is considered to be a balanced market.GLVAR is tracking a two-year trend of fewer distressed sales and more traditional sales, where lenders are not controlling the transaction. In February, 9.3 percent of all local sales were short sales – which occur when lenders allow borrowers to sell a home for less than what they owe on the mortgage. That’s down from 9.7 percent in January and from 14 percent one year ago. Another 9.7 percent of February sales were bank-owned, up from 9.4 percent in January, but down from 12 percent last year.

Lynam said short sales could increase in 2015 if Congress votes to again extend the Mortgage Forgiveness Debt Relief Act of 2007. In December, Congress voted to retroactively extend the tax break it had allowed to expire at the end of 2013 to help distressed homeowners who sold properties in 2014. Unless Congress extends this act through 2015, any amount of money a bank writes off in agreeing to sell a home as part of a short sale this year may become taxable when sellers file their income taxes.
The total number of single-family homes listed for sale on GLVAR’s Multiple Listing Service in February was 13,188, up 4.1 percent from 12,666 in January, but down 3.2 percent from one year ago. GLVAR tracked a total of 3,558 condos, high-rise condos and townhomes listed for sale on its MLS in February, up 3.8 percent from 3,429 in January, but down 0.1 percent from February 2014.
By the end of February, GLVAR reported 7,313 single-family homes listed without any sort of offer. That’s down 0.9 percent from January, but up 15.8 percent from one year ago. For condos and townhomes, the 2,425 properties listed without offers in February represented a 4.2 percent increase from January and a 9.6 percent increase from one year ago.

GLVAR said 37.4 percent of all local properties sold in February were purchased with cash. That’s up from 36 percent in January, but down from 46.8 one year ago and well short of the February 2013 peak of 59.5 percent, suggesting that fewer investors have been buying local homes.

The median price of bank-owned homes sold in February was $159,250, up from $154,900 in January. The median price of homes sold as part of a short sale in February was $165,000, down from $167,000 in January.

These GLVAR statistics include activity through the end of February 2015. GLVAR distributes such statistics each month based on data collected through its MLS, which does not necessarily account for newly constructed homes sold by local builders or for sale by owners. Other highlights include:

  • The monthly value of local real estate transactions tracked through the MLS during
    February increased by 11.7 percent to more than $485 million. For condos, high-rise
    condos and townhomes, February sales totaled more than $80 million, up 26.9 percent from January. Compared to one year ago, total sales volumes in February were up 7.4 percent for homes and up 8.2 percent for condos.
  • In February, 57.3 percent of all existing local homes and 55.6 percent of all existing
    condos and townhomes sold within 60 days. That compares to January, when 59.8
    percent of all existing local homes and 58.2 percent of all existing condos and
    townhomes sold within 60 days.

By The Numbers, vol3

HBRLogoOur February housing statistics suggest the new home market segment is holding up pretty well in 2015. The current pace is pretty similar to what was present in the first quarter of 2014. We counted 474 new home recorded sales (closings) in February. The 2015 2-month sum is 835, compared to the 831 we counted in 2014 during the same period of time.

The median price of new home closings (all product types) in February was $297,860. Although this was a fairly significant 1-month decline ($20,330), it is about where it was expected to be relative to the new home pricing trend during the last half of 2014. The February median was a year to year increase of only $1,493, or less than 1 percent.

If we omit the 20 condo closings (including the high rises) in the February data, the median price of the remaining single family transactions was $293,692, a year to year increase of 1.6 percent.

There was good news with the February new home permits. We counted 661, which was a one month increase of 254. It put the 2015 permit total at 1,068, which is a rise of 27.7 percent. Our regular readers know that we have been expecting a rise in permit activity because of the jump in gross/net sales activity in the last 45 days. The data in our WEEKLY TRAFFIC/SALES WATCH REPORT indicates the overall pace is continuing, good news for the monthly permit counts going forward.

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—————————————————————————————————– “THE LAS VEGAS HOUSING MARKET LETTER” – March 21, 2015 A monthly publication of HOME BUILDERS RESEARCH, INC., call 645-4200 for subscription details. E-mail at [email protected] web site – homebuildersresearch.com DO NOT REPRODUCE WITHOUT PERMISSION
We sorted through 2,842 recorded resales in February. It was a nice increase from what we counted in January (323) but before we start celebrating, we need to see the uptick continue for another month or two. The 2015 total is now at 5,361, a year to year increase of 3 percent.

The median price of the resale closings (all product types) was $177,000. Although this was very consistent with the previous 6 – 8 months, it does represent a year to year increase of $12,000, or 7.3 percent.

The number of overall listings is rising very slowly, but coupled with the increasing total under contract, the February figures from Residential Resources places the supply of listings at 4 months. This is still well below the “normal” figure of 6 months. The “street scuttlebutt” from realtors suggests that virtually any home that is listed at or below $200,000, and is in relatively good condition, should have multiple offers within a week of getting on the MLS. This time frame changes quickly as the price goes up. Once it gets to the FHA maximum loan amount ($287,500), it is a different story. Buyers are more discretionary, kind of like a “normal” market???

Summarizing the resale market by referring to multiple offers and price bidding isn’t accurate. It’s a prime example of how segmented the housing market actually is in Las Vegas. It can’t be generalized with any high degree of accuracy. The status of each price range, market area, product type, etc, all have their individual circumstances. An average size house/lot in the northwest sub-market area might list for $10 – $20 per square foot less than in parts of Henderson. The next graph illustrates the resale closing trend since January, 2012.
There were 393 resale condos in February that were included in the above resale data. If we omit the condos, the remaining 2,126 single family transactions displayed a median price of $185,000. The median price of the resale single family closings has been at roughly $185,000 – $190,000 for the last 6 months. We expected the SFR resale median to rise more during this period. The number of REO listings has risen a little, but certainly NOT enough to greatly impact the overall median price.
The percentage of cash transactions through the MLS in February was up a little at 29 percent, but basically this statistic hasn’t changed much during the last 6 months.
—————————————————————————————————– “THE LAS VEGAS HOUSING MARKET LETTER” – March 21, 2015 A monthly publication of HOME BUILDERS RESEARCH, INC., call 645-4200 for subscription details. E-mail at [email protected] web site – homebuildersresearch.com DO NOT REPRODUCE WITHOUT PERMISSION
Some of the lenders we have spoken to recently are still very positive when they are in front of housing industry groups or individuals who only like to hear only the “good news”. However, when we speak to them one on one, many are worried about what any rising mortgage rates could do to housing sales velocities. It seems not a matter of “if”, but “when” the Fed will begin raising interest rates. Based on our observations, we think the local housing market, both new and resale, do not have a strong enough “base” to hope that consumer demand can absorb any rise in monthly payments. The new home industry already took a huge hit from HUD when they lowered of the FHA maximum loan by 28 percent. Oh sure, there will be a short spurt of sales due to the fence sitters jumping in before the rates do increase, but that euphoria will likely be short lived. It could get bad enough that the Fed will have to re-instate another round of QE (quantitative easing) if the thump on the floor is too extreme! Even a small increase, as expected, could have a negative impact on the psyche of consumers. WE IMPLORE THE FED TO NOT RAISE THE INTEREST RATES, YET. More patience is needed. Only those not involved at the “street level” of the housing market think a small rate increase will have no adverse effect on new home production, and all the jobs that go with it.
We refer back to page one of this newsletter and the graph of new home permits. In 2014 there were 6,632 permits pulled in the Las Vegas metropolitan area. The pace we are on suggests a small increase in 2015, but NOT enough to think that the industry has regenerated itself to anywhere near its past levels of production. The following graph shows the annual permit totals going back to 2000. It gives a clear picture of how much production has changed, but also a very positive outlook of the POTENTIAL there is for growth in the new home industry in Las Vegas.

 

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We suggest the local recovery is still in the early/mid stages of where it should eventually go. The permit count could double in Las Vegas and still be considerably less than what it was in 2000 – 2007. The Fed needs to be extremely careful about ANY interest rate change; it could delay this recovery by another year or more.
We believe there is a huge amount of pent up housing demand that is percolating in Las Vegas. Multitudes of homeowners have felt stuck in their mortgages and homes, unable to make a move to improve their life situation, whether it be moving up or downsizing. However, for our local market to continue to show ANY significant improvement it will have to keep relying on in-migration and baby boomers, rather than a surge of local demand. The loss of equity, savings, drops in FICO scores, losing confidence in the overall economy, and other factors have kept homeowners in their homes much longer than has historically been the norm for the southwestern part of the United States, about 5 – 7 years according to past reports from the US Census. Many people are ready for a change, and would like to upsize or downsize depending on their situation.

The lending segment seems to be treading softly forward toward the summer, waiting for the Fed with all the great wisdom we are led to believe emanates from them, to lead consumers into a brighter future. Do the policy makers at the Federal Reserve really think the real estate market is strong enough to withstand higher interest rates and therefore bigger payments? We don’t. Especially in a market like Las Vegas and other hard hit recession areas, where affordability is absolutely the key to greater sales velocities. According to almost everything that is written, rates will rise, but not too much. So, the next thing we wait for is to see how many “fence sitters” purchase and close a home before June. If they don’t bump the rates in June, then we wait until September. In either case, we don’t see much changing in consumer demand until then.
There are some significant changes on the horizon for lenders and their clients. According to Mike Sweeney (Alpine Mortgage) there have been approximately 1,000 guideline changes since the inception of the Dodd-Frank Act. There are a ton of more changes coming, as well. For example, after August 1st there will a 3 day right to rescind on a purchase. Think about that one …
And, Title Companies are going to be coming under more pressure to make certain that all Disclosures will have to be 100 percent accurate, or else the processing will have to start over. These are just a couple of things that home builders will be watching very closely.

Our updated Finished Lot Report (volume 9) is completed and ready for download from our web site, homebuildersresearch.com. It is a listing of the finished and partially finished lots in the Las Vegas metropolitan area. We have listed and summarized the finished and partially finished lots in each sub-market area, by builder, and master plan. There are charts and graphs to illustrate the share of lot sizes by sub-market area, and more. A huge bonus is the Interactive Map that accompanies the report showing the location of all the data on a Google Earth™ satellite image. This is a very helpful tool for anybody interested in the Las Vegas area land market. You can call in your order at 702-645-4200, or download it directly from our web site, homebuildersresearch.com.
You can also download from our web site our monthly Interactive Land Report. It not only locates the transaction, but when you click on the marker, a data box appears with all the pertinent data from the actual closing transaction. This is another part of our series of land reports for the Las Vegas area.
We have also added a new feature to our web site, homebuildersresearch.com, a monthly data chart that contains new and resale data from the most recent month. It should help with those internal company reports, press releases, and a myriad of other things for housing related professionals.
We always welcome your comments and/or suggestions, you can follow us on Twitter, @hbrlv.
Thank you,
Dennis Smith, President
“THE LAS VEGAS HOUSING MARKET LETTER” – March 21, 2015 A monthly publication of HOME BUILDERS RESEARCH, INC., call 645-4200 for subscription details. E-mail at [email protected] web site – homebuildersresearch.com DO NOT REPRODUCE WITHOUT PERMISSION

View From The Top, vol 3

SNHBABy Nat Hodgson
Executive Director
Southern Nevada Home Builders Association

Nevada’s residential construction industry is breathing a sigh of relief since the Nevada Legislature and Governor Brian Sandoval signed into law Assembly Bill 125, which makes significant and meaningful revisions to the state’s onerous construction defect litigation law.

AB 125 improves current law, NRS Chapter 40, so that Nevada’s homeowners – not attorneys – come first in the resolution process. Although the original law enacted in the mid-1990s was intended to protect homeowners, instead, it opened the flood gates for excessive and in many cases, unwarranted lawsuits.

The goal of AB 125 is to restore Chapter 40’s original intent to facilitate a quick and efficient resolution of homeowners’ construction defect claims, while still giving homeowners access to the judicial system.

AB 125, which went into effect immediately after the governor signed it, has the following important components:

  1. It requires that a construction defect either cause physical damage to a residence or create unreasonable risk of physical damage to persons or property;
  2. It treats attorney’s fees in a construction defect case the same way fees are treated in other lawsuits;
  3. It ensures that the inspection and repair process is conducted in an effective, timely and cost-efficient manner;
  4. It specifies that homeowners should be clearly informed of their rights and obligations in a construction defect case;
  5. It specifies that early resolution of construction defect cases should be encouraged. Parties should have the freedom to explore alternative methods of dispute resolution so that litigation becomes a last step rather than the first step.

 

The impacts of construction defect litigation have plagued our state for more than a decade. Abusive and excessive construction defect lawsuits have depressed the housing construction sector in Nevada, especially for multifamily housing, which bore most of the brunt of Chapter 40 litigation.

New home construction should and can mean more Nevada jobs and economic growth. The residential construction industry believes reform of Chapter 40 will make that happen, which is good news for everyone involved in our housing industry.