The California Association of REALTORS is once again sponsoring a bill in the California legislature to extend anti-deficiency protections to cover refinanced mortgages. California already has so-called "single action" laws protecting former homeowners from deficiency judgements by lenders who foreclose on residential properties.
Unfortunately, current law only applies to "purchase money" mortgages, meaning loans used to provide funds for the original purchase of a residence. What most people don't realise is that loans that have been refinanced in a "cash out" transaction fall outside the anti-deficiency protection of current law. When you did that refi to pull out cash equity from your home to buy a new car and pay for college expenses, you automatically gave up your legal protection from deficiency judgements should you not be able to make your payments in the future and your lender forecloses on you.
The new bill, SB 458 (Corbett), a re-introduction of SB 1178 (Corbett) from 2010, proposes to extend protection to include refinanced debt used to purchase, construct or improve a home. SB 1178 was approved by Congress last year, but was vetoed by Gov. Schwarzenegger. Call your senator to ask them to vote "yes" on SB 458.
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