New Mexico has a slightly higher than average homeownership rate than most of the rest of the country. Trending downward over the past few years, the Land of Enchantment is seeing some improvement in recent months and signs point to more gains coming. Home buyers in New Mexico sometimes look for alternatives to big bank mortgage loans and many have found success with a special form of financing called a hard money loan. These are funded by individuals and small group investors and require that the buyer use their home or owned real estate as collateral to secure the loan. In these cases, most loans can be processed much faster than a typical mortgage and with less paperwork as well - making these special financing options a helpful outlet for many New Mexico home buyers.
Foreclosure Laws in New Mexico
Most foreclosures in New Mexico are required to be managed by the courts. This process is known as a judicial foreclosure. In some cases, with new laws in the state, it is possible for a lender to foreclose using a non-judicial process which can move faster and provide less of a chance for the borrower to catch up on payments in time to save the home. But this is a rare method of foreclosure in New Mexico.
Property Redemption after Foreclosure Sale
For both judicial and non-judicial foreclosures, New Mexico law gives a borrower up to nine months to redeem or reclaim their home after a foreclosure sale. Special provisions or terms in the mortgage or deed of trust can reduce the redemption period, but it cannot be less than one month. Most mortgage agreements in the state do contain a provision stating that the redemption period will be one month.
Deficiency Judgments in New Mexico
When a home is sold in foreclosure, the money that comes from that sale might not be enough to cover the past due payments and penalties that were due from the borrower. In that case, it is possible for a mortgage company to ask the courts for a deficiency judgment to make the homeowner responsible for paying that remaining money. However, there are requirements and limits to the lenders' ability to ask for these payments. Homeowners facing foreclosure should seek qualified legal counsel to help avoid any potential judgments post foreclosure.
Deed in Lieu of Foreclosure
New Mexico does allow for a special arrangement called deed in lieu of foreclosure to help homeowners in jeopardy to avoid court proceedings. Sometimes a lender and borrower can work out an agreement called a deed in lieu of foreclosure where a homeowner can simply turn over possession of the property to the lender and the two part ways or "call it even". The lender must also agree to the terms but this kind of arrangement can save both parties the time and cost of a full foreclosure process and in some cases, it is possible to negotiate a "cash for keys" settlement where the lender provides a small cash payment to help offset the cost of moving out in return for the easier, less costly process.
Grace Period Notice
New Mexico does not have a statewide required grace period built into all foreclosures. Some states force lenders to wait a month or more before foreclosures can proceed. But in New Mexico the only way to stave off the foreclosure is to take advantage of the notice requirements and timing of set court proceedings. In most cases for New Mexico homeowners, this means there is a 30-60 day period of time between being notified of a pending foreclosure and the actual sale when they can work to make arrangements with the mortgage company. Sometimes that is a payment arrangement or a loan modification. It is important to act fast and stay in touch with the lender to get the best possible outcome.
Protections for Military Personnel
The rights, benefits, and protections of the federal Servicemembers Civil Relief Act are extended to members of the New Mexico National Guard units ordered to state active duty for a period of 30 or more consecutive state duty days or to any federally funded duty performed in an operational role for homeland security. N.M. Stat. Ann. § 20-4-7.1
High Risk Mortgage Protections
Homeowners with what is called a high risk loan, one with very high interest, balloon payment schedules or where the buyer had a negative credit history at the time of purchase will have some additional protection against foreclosure in New Mexico. For example, loan assignees with high-cost loans may be held responsible for acts of lenders and mortgage originators, and violations may be used to defend against the foreclosure. Home Loan Protection Act, N.M. Stat. Ann. § 58-21A-11.
Additional State Laws
The maximum legal interest rate on a loan in New Mexico is 15%. State interest rate laws vary from state to state, and can differ depending on the type of credit, loan, or court judgment involved. These statutes are designed to deter predatory lenders and help consumers avoid significant debt by limiting the amount of interest a creditor can charge. New Mexico's maximum interest rate is 15% absent a fixed contract rate.
State homestead laws can differ in the limits they place on the acreage or value of property to be designated as a homestead. New Mexico law limits the homestead exemption to a property value of $30,000. As good as they are, New Mexico's homestead exemptions might not protect your home in every instance. Four general exceptions exist to the homestead rule:
- If there was a pre-existing lien on the property before the establishment of homestead;
- If the homestead property was specifically pledged as credit for a mortgage;
- If you owe past due taxes to the State of New Mexico and New Mexico counties or municipalities; or
- If you owe money to mechanics, contractors, or builders for work performed in repairing or improving the property.
Additionally, these are state homestead protections, and may not apply to federal income tax liens. Under the Constitution's Supremacy Clause, if there is an overlap or a conflict of law, state laws are subject to federal override. That being said, the Internal Revenue Service (IRS) has normally been reluctant to foreclose on a person's home to collect on a tax debt. The IRS usually only get involved if a homestead property is mortgaged or sold off before the federal tax lien has expired.
Lender Licensing Requirements
The Financial Institutions Division of the New Mexico Regulation & Licensing Department, administers the laws and regulations pertaining to mortgage companies working within the state under the Mortgage Loan Company and Loan Broker Act. A Mortgage Broker (Loan Broker) is any person who acts as a finder or agent of either a lender or a borrower in order to procure a mortgage loan. The license covers both first and subordinate mortgages. All New Mexico mortgage licenses are handled through the National Mortgage Licensing System.
New Mexico Legal Issues with Hard Money Loans in the News