Nebraska Foreclosure Laws

Answers

How are trust deeds or mortgage liens treated in Nebraska?

Nebraska now primarily operates as a title theory state where the property title remains in trust until payment in full occurs for the underlying loan. The primary statute under which such foreclosures are undertaken is called the Nebraska Trust Deeds Act. Foreclosure is a non-judicial remedy under this theory. The document that secures the title is called a deed of trust.  Nebraska law also permits mortgages to serve as liens upon real property and for judicial foreclosures to occur through the courts. Because the power of sale provisions in trust deeds is a faster mechanism to effectuate foreclosure and because there is no right to redemption, this is the primary vehicle used to foreclose.

How are Nebraska mortgages foreclosed?

The primary method of foreclosure in Nebraska involves what is known as non-judicial foreclosure. This type of foreclosure does not involve court action but requires notice. When the trust deed is initially signed it will usually contain a provision called a power of sale clause which upon default allows a trustee to sell the property in order to satisfy the underlying defaulted loan.  The trustee acts as a representative of the lender to effectuate the sale which typically occurs in the form of an auction. Because this is a non-judicial remedy there are very stringent notice requirements and the legal documents are required to contain the power of sale language in order to use this type of foreclosure method. In Nebraska trust deeds can also be foreclosed using the same judicial process as relates to mortgages if such option is chosen.

Power of Sale Notice Requirements:

1. Prior to initiating a foreclosure the lender must serve a notice of default and notice of sale must be recorded with the register of deeds. Not less than ten (10) days after the recordation of the notice of default a copy must be sent to the borrower and others such as junior lien holders or those have requested such notice.
2. A notice of foreclosure sale, which is usually incorporated with the notice of default, must be sent to the borrower and all interested parties 20 days prior to the date of the sale. Sale must take place at a time, place and manner as stated in the notice of sale. Sale must take place in the same manner as an execution sale would occur in a judicial foreclosure. The attorney for the trustee may conduct the sale.
3. Generally the notice of sale must be advertised for five (5) consecutive weeks with the last publication at least ten (10) days before the sale but no more than thirty (30) days before the sale. If no address of the trustor (borrower) is set forth in the trust deed and if no request for notice is made pursuant to the loan documents the notice of default must usually be published for at least three (3) times, once a week for three consecutive weeks in a newspaper of general circulation. Publication must begin not later than ten (10) days after the filing of the notice of default.

In Nebraska, the lenders can also go to court in what is known as a judicial foreclosure proceeding where the court must issue a final judgment of foreclosure. Usually if the deed of trust does not contain the power of sale language, the lender must seek judicial foreclosure. The property is then sold as part of a publicly noticed sale. A complaint is filed in court along with what is known a lis pendens. A lis pendens is a recorded document that provides public notice that the property is being foreclosed upon.

What are the legal instruments that establish a Nebraska mortgage?

The documents are known as the trust deed, and in a commercial transaction, a security agreement. Sometimes the mortgage document is combined with the security agreement.  Alternatively, a mortgage is filed to evidence the underlying debt and terms of repayment, which is set forth in the note.

How long does it take to foreclose a property in Nebraska?

Depending on the timing of the various required notices, it usually takes approximately 90-120 days to effectuate an uncontested non-judicial foreclosure. It may take up to six months to effectuate a judicial foreclosure and the borrower may be able to delay a sale up to 9 months. This process may also be delayed if the borrower contests the action in court, seeks delays and postponements of sales, or files for bankruptcy.

Is there a right of redemption in Nebraska?

Nebraska has no post-sale statutory right of redemption with respect to foreclosures which have been confirmed. A redemption can be made prior the final confirmation of the foreclosure sale provided all sums due, including taxes, costs and interest is paid in full.

Are deficiency judgments permitted in Nebraska?

Yes. A deficiency judgment may be obtained when a property in foreclosure is sold at a public sale for less than the loan amount which the underlying mortgage secures. A deficiency action must be commenced with 90 days and is limited to the amount of debt (including costs and fees) subtracted from the fair market value of the property.

What statutes govern Nebraska foreclosures?

The laws that govern Nebraska deed of trust foreclosures are found in Chapter 76, Nebraska Statutes. The specific section on foreclosure sales contained in trust deeds is set forth under Chapter 76-1005.