I am a mortgage originator. My client has an unpaid charge-off on his credit report. He voluntarily surrendered a motor home to the lender, a Nevada credit union. The charge off is about $12K and it represents the difference between the proceeds from liquidating the motor home and the remaining loan balance (and sundry fees). Our underwriter will not require this unpaid charge-off to be paid if I can demonstrate that the deficiency balance "...poses no threat to Fannie Mae's first mortgage lien". My client's attorney (who's since moved away) told him that credit unions (at least in the state of Nevada) have no recourse in this situation (unless my client chooses to contact the credit union). So I need to either 1) prove that a Nevada credit union cannot pursue a deficiency judgment or 2) prove that any deficiency judgment would be subordinate to our new first mortgage. Any thoughts? Thank you!
2 Answers from Attorneys
So long as the deed of trust is recorded first, it will be lower priority than any later recorded judgment. A lender's ALTA policy will insure this in any case.
The statute of limitations on a written instrument - like this - is usually 6 years. Sometimes, it can be as long as 20 years I believe. So, the Credit Union will be able to sue for at least six years from the last date of default in payment. As for subordinate liens - Nevada is race notice state, if the bank records first, any subsequent recorded judgment lien would be subordinate to the bank's lien. The bank certainly know this. It's probably not what they're worried about. They are worried about getting paid each and every month on time. Potential judgment creditors might get in the way of that. davidottolaw.com