2. February 2011 09:06
The California Legislature recently enacted Senate Bill 931 generally prohibiting a deficiency judgment after a short sale for first trust deed lenders of one-to-four residential units. This new law went in to place January 1, 2011.
Unless otherwise exempt, no judgment shall be rendered for a deficiency for a first trust deed lender of one-to-four residential units if the borrower sells for less than the amount owed with the lender’s written consent. A first trust deed lender’s written consent shall obligate the lender to accept the sale proceeds as full payment and to fully discharge the remaining debt on the first trust deed.
Regardless of the law, it would be prudent for a borrower to obtain the lender's agreement to release the borrower from liability for the balance due on the note in writing and signed by the lender.
Exceptions to this new law include: Junior liens, Lender seeking damages for fraud/ waste/ damage to the property, or a borrower who is a corporation.
View additional details at the California Association of Realtors website and view other additional new laws for 2011
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