Home > Corona, Foreclosure, Home Prices, Inland Empire, Loan Modification, Moreno Valley, Murrieta, Real Estate, Riverside, Short Sales, Temecula > California bans Deficiency Judgments on all residential 1st TDs!

California bans Deficiency Judgments on all residential 1st TDs!

Gov. Schwarzenegger last week signed a bill that prohibits a lienholder from pursuing a homeowner for the deficit after a short sale, even on refinanced mortgages.

Senate Bill 931 (Denise Ducheny, D-SD), which was unanimously approved by the Senate in August, was signed into law on Sept. 30 and takes effect Jan. 1, 2011. The bill does not cover 2nd TDs, though California is a one-action state, so if a homeowner has two loans from one lender, they may indeed be protected (check with your attorney for clarification).

The new law, Civil Code 580e, states, ” (a) No judgment shall be rendered for any deficiency under a note secured by a first deed of trust or first mortgage for a dwelling of not more than four units, in any case in which the trustor or mortgagor sells the dwelling for less than the remaining amount of the indebtedness due at the time of sale with the written consent of the holder of the first deed of trust or first mortgage. Written consent of the holder of the first deed of trust or first mortgage to that sale shall obligate that holder to accept the sale proceeds as full payment and to fully discharge the remaining amount of the indebtedness on the first deed of trust or first mortgage.

“(b) If the trustor or mortgagor commits either fraud with respect to the sale of, or waste with respect to, the real property that secures the first deed of trust or first mortgage, this section shall not limit the ability of the holder of the first deed of trust or first mortgage to seek damages and use existing rights and remedies against the trustor or mortgagor or any third party for fraud or waste.

“(c) This section shall not apply if the trustor or mortgagor is a corporation or political subdivision of the state.”

This new law is huge for distressed homeowners who have met resistance with President Obama’s HAFA program, which also provides protection against deficiency judgments from lenders. Though California is a non-recourse state, lenders frequently attempt to insert verbiage into short sale approval letters that would allow them to pursue a seller later for the difference between what the lender received and what was owed, even on non-recourse loans. This new law would now prevent that activity.

Last week, the governor vetoed a bill that would have expanded non-recourse protections for non-cash-out refinances for California homeowners, and many people ripped him for it. Including me. Glad to see the governor taking action to protect his constituents in these very difficult economic times.

To show you support for the governor’s actions, here is his contact info:

Governor Arnold Schwarzenegger
State Capitol Building
Sacramento, CA 95814
Phone: 916-445-2841
Fax: 916-558-3160
email: http://gov.ca.gov/interact#email

We are part of Helping A Million Homeowners, a nationwide organization of brokers who want to make a difference in today’s economy. If the market is going to get back on it’s feet, it’s going to be because real people help families avoid foreclosure through short sale or loan modification.

If you are facing difficulties with your home, contact us today and we’ll explain your options to avoid foreclosure.

(Brian Bean is a real estate broker and ambassador for Helping A Million Homeowners, a nationwide organization that is committed to helping alleviate the financial stress that so many homeowners face today. He can be reached directly at Brian@DreamBigRealEstate.com.)

Brian Bean
Real Estate Professional
www.DreamBigRealEstate.com
www.IEShortSalePros.com
www.HelpingAMillionHomeowners.com

Short Sale Genius Elite

I’ve been specially trained to negotiate short sales with an emphasis on Deficiency Waivers

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