Please be aware Governor Brown signed SB 458, on July 15, 2011, this bill prohibits subordinate lien holders from pursuing borrowers for a deficiency after approving a short sale. It is deemed an urgency bill and as such takes effect immediately.
The California Association of Realtors (C.A.R.) initially sponsored SB 458 to revisit the “anti-deficiency” issue of SB 1178 (Corbett, 2010), which was vetoed by Governor Schwarzenegger. As introduced, SB 458 would have extended existing anti-deficiencyprotections to cover the refinance of purchase money mortgages, and new debt (cash out) incurred to acquire, construct or improve the home. C.A.R. and the lender groups reached an agreement to amend SB 458 to instead expand the provisions of existing law (SB 931 of 2010) which became effective this year. SB 931 requires a first mortgage holder to accept an agreed upon short sale payment as full payment for the outstanding balance of the loan, but does not apply to junior lien holders. SB 458 now extends the protections of SB 931 to junior liens effectively providing that any lender that agrees to a short sale must accept the agreed upon short sale payment as full payment of the outstanding balance of all loans. In addition, this measure will clarify that this rule applies only to residences.
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