California Short Sale Law Protects Homeowners From 2nd Mortgage

BEFORE: SHORT SALE BANKS COULD "GO AFTER SHORT SALE HOME OWNERS" AFTER ESCROW CLOSES

When a short sale scenario is in place, most people think that they can wash their hands free of the whole house headache. Normally, I tell my clients that it is not 100% true, because banks are gonna do what is in their best interests, which is to make money, or minimize financial loss.

So when they approve a short sale approval for a distressed home owner who is trying to short sale their home, the bank knows that they are going to lose money on the deal. But when bank investors called for some asset recovery, banks started going after short sale home owners for a deficiency, even after they closed escrow. A deficiency is the difference between the amount of money your property can sell for and what you owe. So if you owe $400k but we can only sell your property for $300k, the -$100k remainder of balance would be the deficiency. With this shortage, banks could come after a homeowner and possibly require them to pay some money in order to do a short sale.

SOLUTION: SENATE BILL 458, 2ND MORTGAGE PROTECTION OF CALIFORNIA SHORT SELLERS

California Senate Bill 458 will be designed to protect short sale home owners from the short sale lenders/banks. Now these bank/lenders cannot seek a deficiency against the homesellers for the money owed involved in the loan short-payoff and fees associated with a short sale in California.

Senate Bill AB #458: Direct Link

San Diego Union Tribune Article: New law gives added protection to short sale hopefuls

 

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WHAT IS A SHORT SALE?