NO SHORT SALE DEFICIENCIES STARTING JAN 2011
Per the CAR news report under the new law SB931 the 1st lien holders of your loan cannot come after you for the remaining balance once they agree to a short sale starting January 2011.As of July 2011 Gov. Brown signed a law SB 458 which is an extention to the SB 931, that the subsequest lien holders once they accept a short sale can no longer go after the ramaining balance and the homeowner. Now that is great news.
Now in my opinion the negative to that is, that the lenders may ask for seller contributions to offset their losses because they cannot reserve the right to deficiency (Deficiency is the right to collect any unpaid balance). While negotiating Short Sales, lately i am seeing that the 1st lien holders are asking for a seller contributions at a rapid rise. More and more lenders are doing that.
No Short Sale Deficiencies: Starting January 1, 2011, a seller's first trust deed lender cannot obtain a deficiency judgment against the seller after a short sale. Providing written consent to a short sale shall obligate the first trust deed lender to accept the sales proceeds as full payment and discharge of the remaining amount owed on the loan. This law applies to first trust deeds secured by one-to-four residential units, but does not limit the lender from seeking damages for fraud or waste by the borrower. Senate Bill 931. Governor Schwarzenegger vetoed Senate Bill 1178, our sponsored bill, which would have extended California's anti-deficiency protection to refinance loans.