California Short Sale Anti-Deficiency Law Expanded (SB 458)

On Friday July 15th, California Governor Jerry Brown Signed Senate Bill 458 into Law which amends the Section 580e of the Code of Civil Procedure.   The previous law required first mortgage lien holders in a short sale transaction to agree to a paid in full settlement and waive any right to collect from the seller in the future (deficiency judgment). With a short sale, a homeowner is allowed to sell their home for less than the owed on their first mortgage. The state saw a problem with the former law because it only addressed first mortgages and did not protect homeowners from deficiency from second mortgages.

 The new law, added Protections for Short Sale candidates  

The new law will give home sellers protection from deficiency judgments on all liens involved in the short sale. Now, when accepting the terms of a short sale, junior liens must waive their right to pursue a deficiency. The borrower will not be required to owe or pay any amount after the short sale. SB 458 contains an urgency clause making it effective upon signing.

The California Association of realtors applauds Gov. Jerry Brown on Signing SB 458 (Corbett) into law.

““The signing of this bill is a victory for California homeowners who have been forced to short sell their home only to find that the lender will pursue them after the short sale closes, and demand an additional payment to subsidize the difference,” said C.A.R. President Beth L. Peerce.  “SB 458 brings closure and certainty to the short sale process and ensures that once a lender has agreed to accept a short sale payment on a property, all lienholders – those in first position and in junior positions – will consider the outstanding balance as paid in full and the homeowner will not be held responsible for any additional payments on the property.”

This may prove to be a step in the right direction for homeowners who are weighing their options and considering short sale vs. foreclosure.

How do you feel this new law will affect short sales in California? We would love to hear your feedback.

 We can answer any additional questions you may have and help you with your real estate needs. Contact Short Sale Experts at (888) 746-7820 today.

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