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On Friday July 15, 2011, Governor Brown signed into law a California Associations of Realtor’s sponsored bill, Senate Bill 458.


Senate Bill 458 prevents lenders, who have agreed to a short sale, from pursuing a property owner for any deficiency created after a short sale for one-to-four residential units, regardless of whether the lender is a senior or junior lien holder.



Effective immediately for transactions closing escrow from this day forward, both senior and junior lien holders 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


Disclaimer: This is not legal advise and is solely for informational purposes.  I am a California Real Estate Broker specializing in real estate Short Sales, Probate Sales and Regular/Standard sales in the Los Angeles County area.



Aida Pinto

Real Estate Broker

Realtor since 1987

(562) 916-3237





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Aida Pinto (562) 884-6196
Los Angeles County
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Daniel H. Fisher (704) 617-3544 - Charlotte, NC
MCRP - Charlotte Real Estate, NC or SC

as a former Californian, I heard it said that "As California goes, so goes the nation".  This legislation would be a welcome national trend!

Jul 16, 2011 03:51 AM #1
Bryan Robertson
Los Altos, CA

This was a huge bill to get passed and it will make the burden on former homeowners significantly less.  The ability of banks to go back after sellers was a looming cloud over the future of the real estate market.

Jul 16, 2011 05:07 AM #2
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Aida Pinto

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