In a major victory for REALTORS©, Governor Brown signed into law today and effective IMMEDIATELY a C.A.R.-sponsored bill, Senate Bill 458, amending Civil Code Procedure 580(e) and 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. The New law passed 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.
WHAT THIS MEANS FOR SAN DIEGO HOMEOWNERS
That San Diego Homeowners that are in distress and upside down on their property can now go ahead and sell their property without ever worrying that the bank will require any money from them in the short process or ANY time after the sale!
This is a huge difference than before in that, 2nd lien holders (or loans) were allowed to still collect or require the seller to pay money in order to short sale their home. Because of this many people chose to go to foreclosure to get relief from laws that protected people in a foreclosure and not a short sale. Some people also had to turn to Bankruptcy in order to eliminate their debt from these 2nd loans and now they will not have to do that. A short sale provides all the same relief as a foreclosure now, AND protects the homeowner’s credit!
With 610 Short Sale total in June for San Diego (19% of Sales) and 785 Foreclosure Sales (24% of Sales), this could be the incentive needed to swing the numbers in favor of short sales. Short sales, not only protect the homeowner’s credit, but keep property values higher, and help stabilize the market by preventing a homeowner to choose a foreclosure.