The Financial Institutions Reform, Recovery, and Enforcement Act (“FIRREA”) preempts a Nevada law that limited deficiency judgments on foreclosure to the amount by which the price the owner paid to acquire the loan exceeded the foreclosure sale price. BB&T acquired three loans from the same group of defendants when it bought Colonial Bank’s assets from the FDIC. The Financial Institutions Reform, Recovery, and Enforcement Act (“FIRREA”) preempts a since-repealed provision of Nevada law that limited deficiency judgments on foreclosure to the amount by which the price the owner paid to acquire the loan exceeded the foreclosure sale price—thereby, disallowing the purchaser from buying at a discount and reaping a gain from foreclosure and an ensuing deficiency. The decision holds that the law would frustrate the purpose of FIRREA by making it more difficult for the FDIC to dispose of the assets of failed banks. The borrowers’ and guarantor’s attempted defenses based on an alleged oral promise to give them more time to implement a plan to resolve their defaulted loans failed because the loan agreements could be amended only by a writing and because there was no consideration given for the oral promise. Laches and failure to mitigate damages failed as defenses since the lender was under no obligation to exercise its default remedies in a manner so as to reduce the borrowers’ and guarantors’ liability. The suit for a deficiency following non-judicial foreclosure was equitable in nature so the borrowers and guarantors were not entitled to trial by jury.
Ninth Circuit Court of Appeals (Tashima, J.); September 11, 2017; 2017 WL 3976309