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First Substitute S.B. 42

Senator Wayne L. Niederhauser proposes the following substitute bill:


             1     
LIMITATION ON ACTION TO RECOVER DEFICIENCY

             2     
FOLLOWING SHORT SALE

             3     
2012 GENERAL SESSION

             4     
STATE OF UTAH

             5     
Chief Sponsor: Wayne L. Niederhauser

             6     
House Sponsor: Daniel McCay

             7     
             8      LONG TITLE
             9      General Description:
             10          This bill enacts a provision establishing a time limit for an action to recover a
             11      deficiency following a specified sale of residential real property.
             12      Highlighted Provisions:
             13          This bill:
             14          .    bars an action to recover a deficiency following a short sale of single-family
             15      residential property unless the action is commenced no later than three months after
             16      the short sale.
             17      Money Appropriated in this Bill:
             18          None
             19      Other Special Clauses:
             20          None
             21      Utah Code Sections Affected:
             22      ENACTS:
             23          78B-2-313, Utah Code Annotated 1953
             24     
             25      Be it enacted by the Legislature of the state of Utah:


             26          Section 1. Section 78B-2-313 is enacted to read:
             27          78B-2-313. Action to recover deficiency after short sale.
             28          (1) As used in this section:
             29          (a) "Deficiency" means the balance owed to a secured lender under a secured loan after
             30      completion of a short sale of the secured property.
             31          (b) "Obligor" means the person or persons obligated to pay a secured loan.
             32          (c) "Secured lender" means the person or persons to whom the obligation under a
             33      secured loan is owed.
             34          (d) "Secured loan" means an obligation evidenced by a note and secured by a mortgage
             35      or trust deed on secured property.
             36          (e) "Secured property" means single-family, residential real property located in the
             37      state that is the subject of a mortgage or trust deed to secure a secured loan.
             38          (f) "Short sale" means a sale:
             39          (i) of secured property;
             40          (ii) by the owner of the secured property;
             41          (iii) that results in the secured lender being paid less than the balance owing under the
             42      secured loan; and
             43          (iv) made with the secured lender's consent and resulting in the secured lender
             44      releasing the mortgage or reconveying the trust deed on the secured property.
             45          (2) An action to recover a deficiency is barred unless it is commenced no more than
             46      three months after the date of recording of a release of mortgage or reconveyance of trust deed
             47      with respect to secured property and resulting from a short sale of that property.
             48          (3) Subsection (2) does not apply if the obligor has engaged in fraud in connection with
             49      the short sale.
             50          (4) The limitation under Subsection (2) does not apply to an obligation evidenced by an
             51      agreement that:
             52          (a) is separate from the secured loan;
             53          (b) is executed between an obligor and a secured lender in connection with a short sale;
             54      and
             55          (c) obligates the obligor to pay some or all of a deficiency.


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