Short Sales Deficiencies: The New California law

Be in the Know about the New Law on Short Sale deficiencies? 

A Need to Know

What is a short sale?

A Short sale is the sale of real property where the seller’s mortgage lender agrees to accept a loan payment for less than what is owed as an outstanding balance.  In a short sale, a seller is upside down, which means the amount owed to the mortgage lender is more than the market value of the property.

What is the new law on Short Sale Deficiencies? The California new law generally prohibits a mortgage lender from collecting a deficiency or obtaining a deficiency judgment for a short sale involving a loan secured by a 1-4 residential unit property.

The new law also generally prohibits a lender from requiring the borrower to pay any additional compensation, aside from the proceeds of the sale, in exchange for a short sale approval.  This law applies to first trust deeds, second trust deeds, and other junior trust deeds.

The new law went in effect on July 15, 2011 when it was filed as an urgency statute with the California Secretary of State.

What is a deficiency judgment?

A deficiency judgment is a judicial court ruling that a borrower is personally liable for the difference between the outstanding loan balance and the proceeds received by the lender through a short sale or foreclosure. 

To obtain a deficiency judgment in California, a lender must file a lawsuit against the borrower and go through the judicial court process.

 If the lender obtains a deficiency judgment and the borrower does not pay the amount owed, the lender can enforce the judgment by, among other things, garnishing the borrower’s wages, attaching the borrower’s bank accounts, and placing a judgment lien on the borrower’s real property.  A deficiency judgment may also have a negative impact on a borrower’s credit rating.

What is the Deficiency Judgment Law in your state?  Share with us!

For more details and Senate Bill 458 See: http://www.leginfo.ca.gov/pub/11-12/bill/sen/sb_0451-0500/sb_458_bill_20110715_chaptered.html

Hollywood Homes by MC

MC Griffin Campbell, Broker/Owner:  License #: 01819507

Short Sales and Foreclosure Resource (SFR) Certification

Seniors Real Estate Specialist Designation (SRES); MFT, M.Div.

323-382-4364: 323-464-5431     

www.hollywoodhomesbymcampbell.com

email: hollywoodhomesmc@aol.com

Reference: car.org/legal