Fiscal impact reports (FIRs) are prepared by the Legislative Finance Committee (LFC) for standing finance

committees of the NM Legislature. The LFC does not assume responsibility for the accuracy of these reports

if they are used for other purposes.

Current FIRs (in HTML & Adobe PDF formats) are a vailable on the NM Legislative Website (legis.state.nm.us).

Adobe PDF versions include all attachments, whereas HTML versions may not. Previously issued FIRs and

attachments may be obtained from the LFC in Suite 101 of the State Capitol Building North.

F I S C A L I M P A C T R E P O R T

SPONSOR HJC

ORIGINAL DATE

LAST UPDATED

2/7/07

2/26/07 HB 558 & 641/HJCS

SHORT TITLE

Real Estate Deeds of Trust

SB

ANALYST C. Sanchez

APPROPRIATION (dollars in thousands)

Appropriation

Recurring

or Non-Rec

Fund

Affected

FY07

FY08

NFI

(Parenthesis ( ) Indicate Expenditure Decreases)

SOURCES OF INFORMATION

LFC Files

Responses Received From

Administrative Office of the Courts (AOC)

Regulation and Licensing Department (RLD)

Attorney General’s Office (AGO)

SUMMARY

Synopsis of Bill

House Judiciary Substitute for House Bills 558 and 641 amends Section 39-5-18 NMSA 1978

designating priority of redemption rights following a foreclosure sale of real property. The

substitute provides the redemption procedures to be followed by a former owner of the property,

the owner’s personal representative or by any junior mortgagee or other junior lien holder whose

rights were judicially determined in the foreclosure proceeding. The action to redeem must be

undertaken by payment to the purchaser within 9 months from the date of sale, or by filing a

petition for redemption in a pending foreclosure case in the district court in which the judgment

or decree of foreclosure was entered. The substitute provides that the former owner shall have

the first priority to redeem the property, and that if the former owner does not redeem the

property, each junior mortgagee or junior lien holder has a right to redeem that must be exercised

within statutory time limits. The order of priority shall be the same priority as the underlying

mortgages or liens, as set forth in the court order, judgment or decree of foreclosure or as

otherwise determined by the court. The substitute prohibits the assignment, transfer or other

conveyance of redemption rights. The Act defines “date of sale" to mean the date the district

558&641/HJCS – Page

2

court order confirming the special master’s report is filed in the court clerk’s office.

The substitute also amends portions of the Deed of Trust Act, Section 48-10-1 et. seq. NMSA

1978 and related statutory provisions.

Section 1

: amends Section 39-5-18 NMSA 1978 to provide that a redemption after a

trustee’s sale is governed by the Deed of Trust Act.

Section 3

: amends Section 48-10-13 NMSA 1978 to remove language relating to the lack

of completeness of a sale by public auction if the sale as held is contrary to or in violation

of any federal statute because of an unknown or undisclosed bankruptcy.

Section 4

: amends Section 48-10-14 NMSA 1978 to remove language providing that the

conveyance of a land at a public auction through a trustee’s deed shall be without right

of redemption.

Section 5

: amends Section 48-10-16 NMSA 1978, governing redemption, to provide the

following

•

The redemption period after a trustee’s sale is 9 months, or the period

provided in the deed of trust, whichever is the lesser period, and shall

begin to run from the date of the trustee’s sale. The parties may shorten

the redemption period to not less than a month in the deed of trust.

•

The trust real estate may be redeemed by the trustor, the trustor’s personal

representatives, successors or assigns or by any junior encumbrancer by

either: (1) paying to the purchaser, purchaser’s personal representatives,

successors or assigns, at any time within the redemption period, the

amount paid plus interest, taxes, penalties and other amounts specified; or

(2) by petitioning the district court for a certificate of redemption and by

making a deposit of that same amount in cash in the office of the clerk of

that district court at any time within the redemption period.

•

Upon being served with the petition for redemption of the property, a

purchaser of real estate under a trustee’s sale must answer the petition

within 30 days after service of the petition.

•

At a hearing governed by the rules of civil procedure, the judge shall

determine the amount of money necessary for redemption, and at the

conclusion of the hearing, the district court may order the clerk to issue the

certificate of redemption upon such terms and conditions as the district

court deems just.

•

A junior encumbrancer who does not have actual notice or knowledge of

the trustee’s sale and who has been otherwise omitted from the trustee’s

sale proceeding, shall be entitled to redeem the trust real estate by

petitioning the district court in the county where the trustee’s sale was held

and making the appropriate deposit. The purchaser of the trust real estate

at the trustee’s sale may petition the district court to terminate the right of

redemption of an omitted junior encumbrancer. In any action commenced

by or against an omitted junior encumbrancer, the redemption period shall

begin to run from the date final judgment is entered in the action, or from

such later date as may be ordered by a court having jurisdiction if

558&641/HJCS – Page

3

enforcement of a judgment affecting the redemption is stayed on appeal or

for other good cause shown.

Section 6

: amends Section 48-10-17 NMSA 1978 to provide that a separate civil action

may be commenced within six years after the date of a trustee's sale of trust real estate

under a deed of trust as provided in the Deed of Trust Act to recover a deficiency

judgment for the balance due on the contract for which the deed of trust was given as

security. The bill also provides that no deficiency judgment shall be sought or obtained

under any deed of trust securing a residential loan made to a low-income household. HB

558 defines both “low-income household" and “residential loan." The bill provides that

the determination of whether a household is a low-income household and whether a loan

is a residential loan shall be made as of the time the loan is made and based on

information obtained during the loan application process.

Section 7

: provides that the provisions of Laws 2006, Chapter 32 shall apply to deeds of

trust executed on or after May 17, 2006, and the provisions of this act shall apply to

deeds of trust executed on or after the effective date of the act.

Section 8

: contains an emergency clause.

FISCAL IMPLICATIONS

There will be a minimal administrative cost for statewide update, distribution and documentation

of statutory changes. Any additional fiscal impact on the judiciary would be proportional to the

enforcement of this law, petitions to the court and hearings before the court. New laws,

amendments to existing laws and new hearings have the potential to increase caseloads in the

courts, thus requiring additional resources to handle the increase.

SIGNIFICANT ISSUES

This substitute amends Section 48-10-13 NMSA 1978 to remove language relating to the lack of

completeness of a sale by public auction if the sale as held is contrary to or in violation of any

federal statute because of an unknown or undisclosed bankruptcy.

Subsection C provides that the hearing following filing of a petition for redemption shall be set

upon the earlier of the filing for redemption by the former owner or the expiration of the period

for filing redemption.

ADMINISTRATIVE IMPLICATIONS

There may be an administrative impact on the courts as the result of an increase in caseload

and/or in the amount of time necessary to dispose of cases.

OTHER SUBSTANTIVE ISSUES

A “deed of trust" is a deed by a borrower to a trustee for the purposes of securing a debt or the

performance of a contract. See NMSA Sections 48-10-3F and 48-10-8. It differs from a mortgage

in that it can be foreclosed by a non-judicial sale held by the trustee. It is also possible to

foreclose them through judicial proceedings.

558&641/HJCS – Page

4

WHAT WILL BE THE CONSEQUENCES OF NOT ENACTING THIS BILL

Status Quo

CS/nt