OfflineCalifornia homeowners and borrowers who are considering a short sale and wondering about the consequences of this decision can take a deep breath and rest easier effective immediately.
Governor Jerry Brown just signed Senate Bill 458 into law. Senate Bill 458 expands upon previous short sale anti-deficiency laws. The previous law (Senate Bill 931) allowed homeowners to sell their homes at a value less than their existing first mortgage value and the mortgage holder would accept the short sale as full payment of the obligation. That is, the first lien holder was required to waive the right to pursue a deficiency judgment against the seller.
The new law, Senate Bill 458, applies the same treatment to any secondary, or junior loans involved in the transaction. In other words, upon accepting the terms of the short sale, junior lien holders now agree to waive their right to pursue the deficiency judgment. The borrower cannot be required to owe or pay for a deficiency in a short sale.
I think this definitely slants the short sale option to the homeowner's benefit. Of course, if you look at it from a bank's perspective, it increases the risk in California that you have no recourse from the homeowner and perhaps CA is a bad place to lend.
I think there will be unintended consequences of these bills, even though I am sure the CA legislature meant well.
Always Looking to Acquire Houses | Always Looking to Amaze Investors
but as for the rest of the states, especially Fl. has anything changed ? If
a homeowner is going to short sale here & has both a 1st & 2nd mortgage, what are the consequences? Is it any different if the property goes to foreclosure?
the simple answer is that CA has such a liberal leaning legislature that they took the initiative to punish the banks. FL does not have anything like this for the protection of the underwater homeowner. Every bank and every case is different. And that includes foreclosures as well. I have a friend that just went through a short sale in FL and at the last moment Countrywide told him that they would not do the deal unless he signed a $20,000 promissory note. (Instead of the $100,000+ the bank took with the short sale) Most states are run like we are still in the Wild West.
Always Looking to Acquire Houses | Always Looking to Amaze Investors
a ridiculous place to get loans! You have not been able to get HELOCs or 2nds out here for some time; this will make it worse.
great post Bill,
just to add to it... in theory it does sound like a great solution for many homeowners, and not so great for the banks- ding ding ding! (that's a bell ringing) anything that is not so great for the banks is not going to happen. The banks will find ways to deny the short sales; they will pursue 'foreclosures' instead. Correct me if I'm wrong, but a second will not get wiped out with a foreclosure. Banks get $ from feds and insurance if they foreclose. What is their incentive to short sale? NONE!
Learning and progressing every day,
Valerie
Valerie
“And will you succeed? Yes indeed, yes indeed! Ninety-eight and three-quarters percent guaranteed!” ― Dr. Seuss
"I believe in angels, the kind that heaven sends; I am surrounded by angels, but I call them friends" - Unknown
My journal: http://www.deangraziosi.com/real-estate-forums/investing-journals/59110/...
Sounds like a catch 22. Good for one but not so good for the other.
"THE ARCHITECT OF YOUR DESTINY IS YOURSELF"
"SUCCESS WALKS HAND IN HAND WITH FAILURE"
here's a video about the short sale in Ca law if anyone wants to watch... basically same info that Bill stated...
http://theshortsalegenius.com/big-news-for-california-homeowners/2011/07...
Valerie
Valerie
“And will you succeed? Yes indeed, yes indeed! Ninety-eight and three-quarters percent guaranteed!” ― Dr. Seuss
"I believe in angels, the kind that heaven sends; I am surrounded by angels, but I call them friends" - Unknown
My journal: http://www.deangraziosi.com/real-estate-forums/investing-journals/59110/...
More fluff from the politicians. Most short sales were negotiated with no deficiency judgements anyway. So now they enact a meaningless law and say "look at what we've done for the people. Vote for us next time."