Here is the legal notice we just received -
LAW AGAINST SHORT SALE DEFICIENCIES EXPANDED
In a major victory for REALTORS®, Governor Brown signed into law today a C.A.R.-sponsored bill, 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 a 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
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Thom, Great Idea!!! Thanks!!
Submit the new offer and include a copy of SB458 !
Good luck !
Shari P said:
Get ready for these three words on your short sale submission......Short Sale Declined.
This law is typical for CA.....good on paper, bad on the streets. Short sales will be declined and more foreclosures will happen and borrowers will find themselves sued by lawyers on 50/50 recovery contingencies with the 2nd lien holders. A small promissory note to walk away from a big mortgage WAS a great option for borrowers. I can also see the lawsuits already around the who offered the promissory note? This law won't make anything clear.
I would agree that some jr.lien holders might hold out for the 1st to foreclosure and then pursue the deficiency but I think this new law will help. In our office we have gotten to the end of the short sale approval process after months of waiting only to find out the 2nd will not waive the deficiency or the wording in the approval letter is so vague as to leave the client open for future issues after close. At least we will knows before the seller closes the transaction.
Pat Chadwell, broker
This sounds like a win for consumers but those with jr lien holders might find that this will back fire on them. What incentive is a jr lien holder going to have to cooperate with the short sale process? It will be more profitable for jr lien holders to foreclosure than proceed with short sale. I hope for everyone's sake this is not the case.
I assisted Sen. Ducheny to write SB 931 last year, which created CCP sec. 580e, the short sale anti-deficiency statute. This statute applies to all loans on residential property with 1-4 units and is separate from the purchase money statute, which is a different statute, CCP sec. 580b. I am opposed to the new changes under SB 458 and I had organized some opposition to C.A.R.'s proposal, but we were ignored by C.A.R. and the strong lobby proceeded with this bill under the prediction that it will make short sales safer for consumers and Realtors, and that other parties like first lenders and buyers will compensate for the demands of junior lienholders who will now lose their right to pursue any deficiency after the short sale. Sounds good at first, but if you understand foreclosure law, it is obvious to attorneys, me and others whom I have talked to, that this new law on short sales will cause junior lienholders to opt for denying the short sale and making the first lender proceed with foreclosure. Junior lienholders will still maintain the right to pursue the deficiency after foreclosure (in the absence of purchase money protection). So these new changes to the short sale anti-deficiency statute are creating a new, and very big bump in the negotiation, and could potentially bring short sales to a halt for anyone with more than one lien. I sincerely hope I am wrong, but unfortunately, the general consensus among real estate attorneys and Realtors who understand foreclosure laws is that C.A.R.'s proposal to remove the word "first" from the statute and expand the protection to juniors is a very bad idea. It also serves to make a once-elegant and simple statute into a Frankenstein that will make clarity, interpretation, and application extremely difficult. Sorry guys.
Sincerely,
Shanna E. Welsh
Attorney at Law
Sameer Punjani said:
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