As of March 15th, 2012, the time frame for banks to pursue a deficiency judgment after a short sale changed from 6 years to 3 months. This is a significant change, and may be important if you are involved in a short sale, especially if the deficiency was not negotiated or addressed during the short sale.
S.B. 42, passed by the 2012 Utah State Legislature and signed by the Governor, imposes a 3-month statute of limitations within which the mortgage lender must file a lawsuit to collect a remaining balance after the closing of a short sale. The 3-month period begins with the recording date of the reconveyance (the release) of the lender’s trust deed. The objective of the bill is to encourage borrowers to engage in short sale negotiations with some comfort in knowing that the limited 3-month statute of limitation would apply to a lawsuit to collect the remaining balance rather than the 6-year statute of limitations applicable generally to all written contractual obligations. The legislation recognizes also that often a short sale agreement between a lender and a borrower will include a written payment plan for some or all of the remaining loan balance. The 3-month statute of limitation does not apply to such an agreement. Finally, the 3-month statute of limitation does not apply if the borrower engaged in fraud in connection with the short sale. The legislation will be found at Utah Code Section 78B-2-313.
If you are considering short selling your home or have any questions regarding the process, give a short sale specialist a call at 801-683-9666.