SENATE BILL 142
52nd legislature - STATE OF NEW MEXICO - first session, 2015
INTRODUCED BY
Michael Padilla
AN ACT
RELATING TO REAL PROPERTY; CLARIFYING THAT FORECLOSURE OF RESIDENTIAL REAL PROPERTY IS A JUDICIAL PROCEDURE; REQUIRING CREDITORS TO PROVIDE BORROWERS NOTICE OF ANY OPPORTUNITIES FOR LOSS MITIGATION PRIOR TO FORECLOSURE.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF NEW MEXICO:
SECTION 1. [NEW MATERIAL] FORECLOSURE BY JUDICIAL ACTION ON HOME LOANS.--Real property encumbered by a home loan shall be foreclosed through judicial action.
SECTION 2. Section 48-10-3 NMSA 1978 (being Laws 1987, Chapter 61, Section 3, as amended) is amended to read:
"48-10-3. DEFINITIONS.--As used in the Deed of Trust Act, unless the context otherwise requires:
A. "beneficiary" means the person named or otherwise designated in a deed of trust as the person for whose benefit a deed of trust is given or the person's successor in interest;
B. "contract" means an agreement between or among two or more persons, including, without limitation, a note, promissory note, guarantee or the terms of any deed of trust;
C. "credit bid" means a bid made by the beneficiary in full or partial satisfaction of the contract that is secured by the deed of trust. A credit bid may only include an amount owing on a contract with interest secured by liens, mortgages, deeds of trust or encumbrances that are superior in priority to the deed of trust and which liens, mortgages or encumbrances, whether recourse or nonrecourse, are outstanding as provided in the contract or as provided in the deed of trust, together with the amount of other obligations provided in or secured by the deed of trust and the costs of exercising the power of sale and the trustee's sale, including the fees of the trustee and reasonable attorney fees actually incurred by the trustee and the beneficiary;
D. "home loan" means a loan, including an open-end credit plan, other than a bridge loan, where the principal amount does not exceed the conforming loan size limit for a single-family dwelling as established by the federal national mortgage association and where the loan is secured by:
(1) a mortgage or deed of trust on real estate in this state upon which there is located or there is to be located a structure:
(a) designed principally for occupancy by one to four families; and
(b) that is or will be occupied by a borrower as the borrower's principal residence; or
(2) a security interest on a manufactured home that is or will be occupied by a borrower as the borrower's principal residence;
[D.] E. "parent corporation" means a corporation that owns eighty percent or more of each class of the issued and outstanding stock of another corporation or, in the case of a savings and loan association, eighty percent or more of the issued and outstanding guaranty capital of the savings and loan association;
[E.] F. "person" means an individual or organization;
[F.] G. "deed of trust" means a document by way of mortgage in substance executed in conformity with the Deed of Trust Act and in conformity with Section 47-1-39 NMSA 1978 granting or mortgaging trust real estate to a trustee qualified under the Deed of Trust Act to secure the performance of a contract;
[G.] H. "junior encumbrancer" means a person holding a lien, mortgage or other encumbrance of record evidencing an interest in the trust real estate that is subordinate in priority to the deed of trust and includes a lienholder, a mortgagee, a seller and a purchaser as provided in a real estate contract and, where the context is applicable, escrow agents as provided in a real estate contract;
[H.] I. "trust real estate" means any legal, equitable, leasehold or other interest in real estate, including the term "real estate" as defined in Section 47-1-1 NMSA 1978 and any improvements and fixtures, which is capable of being transferred whether or not the interest is subject to any prior mortgages, deeds of trust, contracts for conveyance of real estate, real estate contracts or other liens or encumbrances; provided, however, trust real estate shall not include:
(1) any real estate used by the trustor for farming operations, including farming, tillage of the soil, dairy farming, ranching, production or raising of crops, poultry or livestock, and production of poultry or livestock products in an unmanufactured state; or
(2) oil and other liquid hydrocarbons, or gas, including casinghead gas, condensates and other gaseous petroleum substances, or coal or other minerals in, on or under real estate, including patented and unpatented mining claims, unless such minerals have not been severed from and are included with the surface estate.
The character of trust real estate shall be determined as of the date of the deed of trust covering the trust real estate;
[I.] J. "trustee" means a person qualified as provided in the Deed of Trust Act. The obligations of a trustee to the trustor, beneficiary and other persons are as provided in the Deed of Trust Act, together with any other obligations specified in the deed of trust. Both the beneficiary and the trustee have all the powers of a mortgagee as provided by law; and
[J.] K. "trustor" means the person or the person's successor in interest granting or mortgaging trust real estate by a deed of trust as security for the performance of a contract and is the same as a mortgagor granting or mortgaging real estate by way of mortgage as provided by law."
SECTION 3. Section 48-10-10 NMSA 1978 (being Laws 1987, Chapter 61, Section 10, as amended) is amended to read:
"48-10-10. SALE OF TRUST REAL ESTATE--POWER OF TRUSTEE--FORECLOSURE OF DEED OF TRUST.--
A. By virtue of the trustee's position, a power of sale is conferred upon the trustee of a commercial deed of trust under which the trust real estate may be sold as provided in the Deed of Trust Act after a breach or default in performance of the contract for which the trust real estate is granted or mortgaged as security or a breach or default in performance of the deed of trust. Except as specifically provided in the Deed of Trust Act, the trustee shall not delegate the duties of the trustee as provided in the Deed of Trust Act. [At the option of the beneficiary] A residential deed of trust [may] on a home loan shall be foreclosed in the manner provided by law for the foreclosure of [mortgages on real estate] home loans. The trustee does not have the power of sale in a residential deed of trust on a home loan. Either the beneficiary or the trustee shall constitute the proper and complete party plaintiff in any action to foreclose a deed of trust.
B. The trustee or beneficiary may commence an action to foreclose a deed of trust at any time before the commercial trust real estate has been sold as provided in the power of sale. A sale of trust real estate as provided in a power of sale in a deed of trust shall not be held after an action to foreclose the deed of trust has been commenced unless the foreclosure action has been dismissed.
C. The power of sale of trust real estate conferred upon the trustee shall not be exercised before the expiration of ninety days from the recording of the notice of the sale.
D. The trustee need only be joined as a party in separate civil actions pertaining to a breach of an obligation of a trustee as provided in the Deed of Trust Act or as provided in the deed of trust. Any order of the court entered against the beneficiary is binding upon the trustee with respect to any actions that the trustee is authorized to take by the deed of trust or by the Deed of Trust Act. If the trustee is joined as a party in any other separate civil action, other than an action in which the trustee is an indispensable or necessary party, the trustee is entitled to be immediately dismissed and to recover the costs and reasonable attorney fees actually incurred by the trustee from the person joining the trustee and from the beneficiary, jointly and severally."
SECTION 4. Section 58-21A-6 NMSA 1978 (being Laws 2003, Chapter 436, Section 6, as amended) is amended to read:
"58-21A-6. DEFAULT--NOTICE--RIGHT TO CURE.--
A. Before an action is filed to foreclose or collect money due pursuant to a home loan or before other action is taken to seize or transfer ownership of property subject to a home loan, the creditor or creditor's assignee of the loan shall deliver to the borrower a notice of the right to cure the default informing the borrower [of]:
(1) of the nature of the default;
(2) of the borrower's right to cure the default by paying the sum of money required, provided that a creditor or assignee shall accept any partial payment made or tendered in response to the notice. If the amount necessary to cure the default will change within thirty days of the notice, due to the application of a daily interest rate or the addition of late fees, as allowed by the Home Loan Protection Act, the notice shall give sufficient information to enable the borrower to calculate the amount at any point within the thirty-day period;
(3) of the date by which the borrower may cure the default to avoid a court action, acceleration and initiation of foreclosure [or other action to seize the property], which date shall not be less than thirty days after the date the notice is delivered, and the name and address and telephone number of a person to whom the payment or tender shall be made;
(4) that, if the borrower does not cure the default by the date specified, the creditor or assignee may file an action for money due or take steps to terminate the borrower's ownership in the property by requiring payment in full of the home loan and commencing a judicial foreclosure proceeding [or other action] to seize the property; [and]
(5) of the name and address and the telephone number of a person whom the borrower may contact if the borrower disagrees with the assertion that a default has occurred or the correctness of the calculation of the amount required to cure the default; and
(6) of all available loss mitigation options that are applicable to the borrower's home loan.
B. If a creditor or assignee asserts that grounds for acceleration exist and requires the payment in full of all sums secured by the home loan, the borrower, or anyone authorized to act on the borrower's behalf, may, at any time prior to the time title is transferred by means of foreclosure by judicial proceeding [and sale or otherwise], cure the default and reinstate the home loan. Cure of the default shall reinstate the borrower to the same position as if the default had not occurred and shall nullify, as of the date of the cure, an acceleration of any obligation under the home loan arising from the default.
C. To cure a default under this section, a borrower shall not be required to pay any charge, fee or penalty attributable to the exercise of the right to cure a default, other than the fees specifically allowed by this subsection. The borrower shall not be liable for any attorney fees relating to the default that are incurred by the creditor or assignee prior to or during the thirty-day period set forth in Subsection A of this section, nor for any such fees in excess of one hundred dollars ($100) that are incurred by the creditor or assignee after the expiration of the thirty-day period but prior to the time the creditor or assignee files a judicial foreclosure or other judicial action [or takes other action to seize or transfer ownership of the real estate]. After the creditor or assignee files a judicial foreclosure or other judicial [action or takes other] action to seize or transfer ownership of the real estate, the borrower shall only be liable for attorney fees that are reasonable and actually incurred by the creditor or assignee, based on a reasonable hourly rate and a reasonable number of hours.
D. If a default is cured prior to the initiation of any action to foreclose or to seize the residence, the creditor or assignee shall not institute a proceeding or other action for that default. If a default is cured after the initiation of any foreclosure action, the creditor or assignee shall take such steps as are necessary to terminate the action.
E. A creditor or a creditor's assignee of a home loan that has the legal right to foreclose shall, in a foreclosure, use [the] judicial foreclosure procedures [provided by law]. In such a proceeding, the borrower may assert the nonexistence of a default and any other claim or defense to acceleration and foreclosure, including any based on a violation of the Home Loan Protection Act, though no such claim or defense shall be deemed a compulsory counterclaim.
F. When a judicial foreclosure complaint is filed, a creditor shall:
(1) file with it a certificate of the absence of loss mitigation that is current as of thirty days prior to the filing of the judicial foreclosure action;
(2) file with it a notice of right to cure the default with proof that the notice has been sent to the borrower and such notice must include information required by the Home Loan Protection Act; and
(3) deposit the original note and any allonges, indorsements or other indicia of transfer of ownership of the note to the creditor and all prior owners or assignees of the note into the court registry.
G. When a creditor moves for judgment in a judicial foreclosure action, the creditor shall file a certificate of the absence of loss mitigation that is current as of thirty days prior to the filing of the motion."
- 11 -