C.A.R. issued a consumer alert yesterday warning borrowers of the liability associated with refinanced mortgages. To help protect consumers, C.A.R. is sponsoring Senate Bill 1178 by State Sen. Ellen Corbett (D-San Leandro) to extend anti-deficiency protections to homeowners who have refinanced “purchase money” loans and now are facing foreclosure. The Senate may vote on the bill as early as next week.
Currently, if a homeowner defaults on a mortgage used to purchase their home, the homeowner’s liability on the mortgage is limited to the property itself. While this law has helped protect borrowers since its inception in the 1930s, it does not extend the protection for purchase money mortgages to loans that refinance the original purchase debt—even in cases where the loan was refinanced to achieve a lower interest rate.
C.A.R. also issued a Red Alert yesterday urging REALTORS® in targeted areas to contact their senator. The Red Alert can be found online at http://www.car.org/governmentaffairs/getinvolved/redalertsb1178/.