SB 931 Deficiency Judgment Rescue on Refi Loans

Real Estate Broker/Owner with Riede Real Estate, Lic. 01310792

Short SalesRecently, I wrote an article on Sacramento Real Estate Voice that breaks down CA SB931 which will take effect on January 1, 2011 in California.

This new California bill is  deficiency protection for CA Short Sales of 1-4 units which protects homeowners and investors from recourse on their first mortgages and Deeds of Trust.

Apparently, the banks did not lobby against this bill and some say it is because the banks already have such a bad reputation with the public that they didn't want any further bad publicity. 

My guess is that there is more to it than that and the banks will have every intention of requiring a promissory note be signed and or a contribution from the seller of a Short Sale before they will approve the Short Sale.  Many times the bank ask for this now but I believe that this will be mandatory with the banks in the future.

Any Short Sale agent worth their salt in my opinion should be postponing Short Sale approvals until after January 1, 2011 to protect their seller who refinanced their 1st mortgage in the State of California.

You can read more at Short Sale Ship is Docking on January 1, 2011 where who and what applies to the protection of a deficiency judgment is spelled out.

As always a CPA and/or attorney should always be consulted by the homeowner/investor prior to deciding what is best for them with a Short Sale or a Foreclosure.


Gena Riede, CDPE working with Sacramento Short Sale sellers who are having difficulty paying their house payment. CA RE License #01310792

Comments (6)

Vickie Nagy
Coldwell Banker Residential Real Estate - Palm Springs, CA
Vickie Jean the Palm Springs Condo Queen

I went over and read Short Sale Ship is Docking on January 1, 2011 and as you say

"...SB 931 does not include those homeowners with HELOC loans nor anyone who is in the throws of a strategic default.  It also does not apply when fraud has been committed (lying on a hardship) nor does it apply if the homeowner has trashed the property or removed appliances and intentional damaged the property."

There are far too many owners of trashed properties. It's a bad situation, but trashing the property is not a solution.

Nov 27, 2010 05:23 AM
Gena Riede
Riede Real Estate, Lic. 01310792 - Sacramento, CA
Real Estate Broker - Sacramento CA Real Estate (916) 417-2699

Vickie, that's true but it certainly is a warm welcome for those who refinanced their original loan and investors who have not done those things...and there are many of them.  It's a God send for many!

Nov 27, 2010 05:37 AM
William Johnson
Retired - La Jolla, CA

Hi Gena, Hi Again and hope you had a wonderful and Happy Thanksgiving. Sadly this wasn't passed 2 years ago. I was in favor of a disclosure from Lenders doing refi's about the difference in purchase money and a refi'd loan and the potential consequences. I still think there should be a disclosure for every refi but at least this new bill is excellent for homeowners in trouble that had already refi'd. Lenders are fickle and may decide not continue to cooperate on short sales but we will have to see how they try to get around this. Future loans, at least here in CA will indeed have some much tighter restrictions.

Nov 27, 2010 06:33 AM
Gena Riede
Riede Real Estate, Lic. 01310792 - Sacramento, CA
Real Estate Broker - Sacramento CA Real Estate (916) 417-2699

Hi William, yes my Thanksgiving was very nice, thanks for asking and I hope yours was equally as nice.

It would have been nice if the bill was retroactive to help many of those refi's on their purchase money loans that went through the Short Sale process.  But thank heavens we finally have a bill passed to offer much needed assistance. Yes, those homeowners/investors finally will finally get some much needed help with SB 931.

The jury is out right now on how the banks will react but I really think they have something up their sleeves...time will tell.

It's always nice to hear from you, William.

Nov 27, 2010 06:51 AM
Lynda Eisenmann
Preferred Home Brokers - Brea, CA
Broker Associate ,CRS,GRI,SRES, Brea,CA, Orange Co

Hi Gena,

Good info, and I'm in agreement with both you and William on the issue.

As far a owners who trash their homes, not only will they be exempt, they're also committing a crime! And of course the punishment varies depending on the state. Not only does it hurt the bank, it also impacts every single neighbor around, we all know that a trashed property is going to sell for less further driving down prices for everyone.

Nov 27, 2010 02:52 PM
Gena Riede
Riede Real Estate, Lic. 01310792 - Sacramento, CA
Real Estate Broker - Sacramento CA Real Estate (916) 417-2699

Oh yes, I agree Lynda.  I don't think those who trashed their homes have any idea of what might be in store for them down the line, legally.

Dec 05, 2010 04:24 AM