SB 458 Prohibiting Deficiency for a California ShortSale
Governor Brown signed SB 458 this week. Senator Corbett’s bill 458 will extend anti-deficiency protection for all mortgages in a short sale. Presently, SB 931 added Civil Code 580e in January, which prohibited first mortgage lenders from pursuing a seller for a deficiency after a short sale.
SB 458 takes effect immediately as an urgency statute. It applies to 1 to 4 units in California, and only for a short sale. Junior lenders such as a second or third mortgage can no longer pursue a deficiency after a short sale on 1 to 4 units in California.
If you’re thinking about doing a short sale and have been putting it off, don’t wait. Now is the time to call me to get the ball rolling. This still could mean that banks could ask for seller contributions if the seller is in a position to pay it for second and third mortgages. The details of how this new law will be interpreted remains to be seen but at least it’s a positive step in the right direction.
It still means that a short sale is still a far better option than a foreclosure, especially if you’ve got a hard money loan in second position. At least it will protect the people who never got a release of liability because their agent didn’t know enough to ask for it. Remember that even with this new law (and maybe more so because of it) you NEED LEGAL ADVICE when doing a short sale.
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