I was pleased to see that the November/December issue of Realtor Magazine has a great article regarding California's new (as of July 15) Anti-deficiency Law, SB931. As a Short Sale Listing Agent in the Palm Springs area, this is a question I get asked frequently. Here is a short re-cap..
The original anti-deficiency law, SB580e was revised on July 15, 2011 stating that
"No deficiency will be owed, collected, requested, or rendered upon a note secured SOLELY by a deed of trust on a dwelling of not more than four units, in a SHORT SALE, where the written consent of the holder of the deed of trust has been obtained."
The effect is to protect junior mortgage liens with anti-deficiency judgments. It also covers both owner occupied as well as investment properties and, refinanced loans. Before this law was passed, once you had refinanced your purchase money loan in California, you lost the anti-deficiency protection. This caused many homeowners to allow their properties to go to Foreclosure rather than risk being sued for the loan deficiencies.
This new law does NOT apply to corporation or a if owner is a political subdivision of the State.
Lenders still retain their right to seek damages for fraud and waste.
Important Note: Barring a deficiency judgement does not preclude attempts by a debt collector to collect the debt! However, it does mean that they may NOT take you to court to settle the debt. Do not be fooled into paying a debt that cannot be enforced against you in a court of law!
Short Sales are tricky, but in California, I have found this to be more protection for my Short Sale Sellers.
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