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

SPONSOR Park

ORIGINAL DATE

LAST UPDATED

1/30/06

HB 254

SHORT TITLE Amend Deed of Trust Act

SB

ANALYST Lewis

APPROPRIATION (dollars in thousands)

Appropriation

Recurring

or Non-Rec

Fund

Affected

FY06

FY07

NFI

(Parenthesis ( ) Indicate Expenditure Decreases)

SOURCES OF INFORMATION

LFC Files

Responses Received From

Attorney General (AGO)

SUMMARY

Synopsis of Bill

House Bill 254 amends various provisions of the Deed of Trust Act and repeals two sections of

the act.

The bill removes certain restrictive language, thus allowing deeds of trust to be used for loans

of less than $500,000 and for single-family and other residential (whether or not designed for

low-income households) as well as commercial properties.

The bill also allows a deed of trust to be used when trust real estate is located both in New

Mexico and in one or more other states.

In addition, the bill shortens the time between notice of sale and actual sale by the trustee,

from not less than 180 days to not less than 90 days.

It removes the requirement that notice of sale be posted on the actual property.

And, House Bill 254 removes the current 12-month time limit on bringing a civil action to

recover deficiency judgment for the balance due.

SIGNIFICANT ISSUES

As explained by the Attorney General’s Office (AGO),

a deed of trust is a security instrument

used for financing the purchase of real estate. In such a transaction, the borrower (grantor or trus-

tor) transfers the legal title for the property to the trustee who holds the property in trust as secu-

House Bill 254 – Page

2

rity for the payment of the debt to the lender or “beneficiary.” If the borrower pays the debt as

agreed, the deed of trust becomes void. If, however, he defaults in the payment of the debt, the

beneficiary directs the trustee to sell the property at a public sale, under the terms of the deed of

trust. Deeds of trust avoid judicial foreclosure proceedings and therefore are the favored and cus-

tomary financing mechanism in many states.

Deeds of trust allow for non-judicial foreclosures in the case of default whereas mortgages re-

quire judicial foreclosures. Non-judicial foreclosure is generally more expeditious and less ex-

pensive.

This bill would effectively allow any real estate sold in New Mexico, including residen-

tial property, to be subject to the act.

ML/mt