Nevada Clarifies Mortgage Law, But What About Deed of Trust Lender Entry Provisions?

Image of a road though the desert in Nevada with blue skies and desert mountains in the background. Captioned: Nevada Clarifies Mortgage Law, But What About Deed of Trust Lender Entry Provisions?

In May 2019, effective October 1, 2019, Nevada passed Senate Bill 382 amending the law pertaining to deeds of trust, foreclosure sales, and homeowners’ associations.

Among other things, this is a change to Nevada Revised Statute § 40.050, whose language states that a mortgage of real property is not deemed a conveyance. If a mortgage does not constitute a conveyance, the mortgage lender may take possession on the home upon the inhabitant’s default, bypassing a judicial foreclosure sale.

Nevada employs a deed of trust between the home buyer and the lender. A deed of trust places the legal ownership of a home with a designated trustee until the buyer—who holds equitable ownership—pays off the loan.   

Of course, some buyers do experience financial challenges and find themselves unable to pay their mortgages.

Here, we briefly explore the ramifications, as seen through a case that shook mortgage lenders’ expectations in homes they held legally through deeds of trust.

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Probate Transfers of Real Property in Nevada

Probate is the legal process of settling a decedent’s estate and transferring property to devisees or heirs entitled to receive it. In Nevada, probate proceedings are overseen by the district court of the county where the decedent resided at the time of death (NRS 136.010). Laws governing wills and decedent’s estates are codified at Title 12 of the Nevada Revised Statutes.

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Conveying Real Property from a Living Trust in Nevada

For purposes of estate planning, a living trust allows the trust maker to make decisions about their assets in the event of death. The settlor establishes the terms and assets of the trust in a document called the trust instrument. In addition to appointing the trustee of the trust, the trust instrument also designates a beneficiary or provides for the designation of a beneficiary by the trustee (NRS 163.006). Note that under 163.008, real property must be transferred into trust by a written instrument (deed), which was signed by the settlor or an authorized trustee, and recorded in the county where the property is located.

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