Last year, Utah legislators decided to take action to make it less risky for homeowners to short sell their home. S.B. 42 is designed for traditional Utah short sales that fall outside the HAFA regulations. In this type of transaction, the lender releases the mortgage (deed) against the property in exchange for receiving the net proceeds from the sale. Unlike with HAFA, the homeowner still has an outstanding unsecured loan balance they are liable to repay.

In many case, the homeowner and the lender will agree to a repayment plan for this unsecured debt. However, in the event that no such agreement is in place, the lender’s other recourse is to file a lawsuit against the borrower to collect the balance. Prior to 2012, banks had a six month window from the date they release the deed to file such a suit. Now, that window has been narrowed to just three months. This may bring relief to borrowers who are waiting anxiously to see if their bank is going to come after them to collect the outstanding balance of their mortgage after a short sale.