If you are faced with selling your house short in today's market, you NEED to know this updated information. According to a release from the California Association of REALTORS:
Gov. Jerry Brown has signed SB 458 (Corbett) into law. SB 458 ensures that any lender that agrees to a short sale must accept the agreed upon short sale payment as payment in full of the outstanding balance of all loans.
Under previous law , a first mortgage holder could accept an agreed-upon short sale payment as full payment for the outstanding balance of the loan, but unfortunately, the rule did not apply to junior lien holders. SB 458 extends the protections of previous law to junior liens.
SB 458 contains an urgency clause making it effective upon signing.
This means that, once the bank has agreed to the short sale price, and you have sold the home, your lender CANNOT come back to collect on ANY of your loans. When the deal's done, it's done!