In a major victory for Homeowners facing the loss of their homes, Governor Brown signed into law today, Senate Bill 458, prohibiting a deficiency after a short sale for one-to-four residential units, regardless of whether the lender is a senior, or junior lienholder. Effective immediately for transactions closing escrow from this day forward, both senior and junior lienholders cannot require a borrower to owe, or pay for any deficiency in a short sale. This law also prohibits any deficiency judgment to be requested, or rendered for senior, or junior liens after a short sale of one-to-four residential units. Any purported waiver of this rule shall be void and against public policy.
Although a lender cannot require a borrower to pay any additional compensation in exchange for a short sale approval, the new law does not prohibit a borrower from voluntarily offering a monetary contribution to a lender in hopes of obtaining a short sale. A lender is also permitted under the new law to negotiate for a contribution from someone other than the borrower, such as other lenders, agents, relatives, and the like.
Exceptions to the new law include a lender seeking damages for a borrower’s fraud or waste; a borrower that is a corporation, LLC, limited partnership, or political subdivision of the state; a lien secured by a bond as specified; a public utility lien; and additional rules apply if a note is cross-collateralized by more than one property.
This law is fully set forth as Senate Bill 458 (Corbett) at www.leginfo.ca.gov.
For more information on the foreclosure process and California real estate law visit MellowLawFirm.com.
Leave a Reply
You must be logged in to post a comment.