-Steven Fong Realtor
Update on Short Sales from:
Denise E. Chambliss
Litigation of Trust/Estate and Business Disputes
SB 458 - New Protection in California for Homeowners with a Short Sale
This week, Gov. Jerry Brown signed into law Senate Bill 458, which is a new law regulating short sales and the termination of a homeowner's liability on the junior lien holders after the conclusion of a short sale.
Specifically SB 458 extends the protections of SB 931 (2010) to ensure that any lender who agrees to a short sale must accept the agreed-upon short sale payment as payment in full of the outstanding balance of all loans. Under previous law (SB 931 of 2010), a first mortgage holder could accept an agreed-upon short sale payment as full payment for the outstanding balance of the loan, but unfortunately, the rule did not apply to junior lien holders. SB 458 contains an urgency clause making it effective upon signing.
"The signing of this bill is a victory for California homeowners who have been forced to short sell their home only to find that the lender will pursue them after the short sale closes, and demand an additional payment to subsidize the difference," said C.A.R. President Beth L. Peerce. "SB 458 brings closure and certainty to the short sale process and ensures that once a lender has agreed to accept a short sale payment on a property, all lienholders - those in first position and in junior positions - will consider the outstanding balance as paid in full and the homeowner will not be held responsible for any additional payments on the property." http://www.car.org/newsstand/newsreleases/sb458/
Under the new SB 458 law, lenders who agree to a short sale, which by definition will yield insufficient funds to cover the outstanding loans on a property, must accept it as payment in full for all loan balances. Before SB 458, a first mortgage holder could accept an agreed-upon short sale payment as full payment for the first mortgage but a junior lien holder (i.e. the second) could still hound the seller for the full amount due on the junior lien after the close of the short sale.