Senate Bill 931 was recently passed giving much relief to sellers who are in a short sale position.

The bill, which took effect on January 1, 2011, expands existing anti-deficiency laws for first lien holders  regarding loans secured by properties of 1-4 units.

In part, the new provides that “No judgment shall be rendered for any deficiency under a note secured by a first deed of trust mortgage for a dwelling of not more than four units, in any case in which the trustor or mortgagor sells the dwelling for less than the remaining amount of the indebtedness due at the time of sale with the written consent of the holder of the first deed of trust or first mortgage.”  

Simply put, California sellers who are granted a short sale by a lender holding a first mortgage will now be exempt from a deficiency judgment. With Senate Bill 931, homeowners will no longer be responsible for a deficiency on first mortgages in California.

According to Senate Bill 931 — starting January 1, 2011, a new California law will prohibit a seller’s first frust deed lender from obtaining a deficiency judgment against the seller after a closed short sale.  Providing written consent to a short sale will obligate the first trust deed lender to accept the sales proceeds of the short sale as full payment and discharge of the amount owed on the loan.  This law will generally apply to first trust deeds secured by one-to-four residential units, but will not limit a lender seeking damages for fraud or waste by the borrower. If you are in the market for a short sale, contact Marilyn Dashe, short sale certified, at Sea Coast Exclusive Properties in Encinitas, California.

Because of falling home prices, borrowers who always paid their mortgage but who have run into unforeseen conditions, like unemployment or a job transfer, can no longer sell their homes for what they owe on their mortgage. So they are forced to sell their home as a Short Sale or Foreclosure and may get caught in a later Deficiency Judgment.

Whether banks can and will pursue judgments depends on many factors, including what state the borrower lives in and whether there’s a second mortgage or other liens on the property.

Some states, such as California, are non-recourse and don’t allow deficiency judgments. But even in these states, if the original loan was refinanced, some or all of it may be subject to deficiency claims.

Deficiency judgments on Short Sales can happen anywahere. In these cases, extinguishing the debt is often a matter of negotiating with the bank. You must ask for a written release of all debt, or you can still be liable for a judgment to be filed against you.

A real estate attorney in Florida sums it up: “People shouldn’t have a false sense of security that a deficiency judgment may not be later sought.” It’s a ticking time bomb.

If you are one of the many thousands of homeowners who have received a Notice of  Default on your home, you now have 180 days before the bank has the right to set a date for a Trustee Sale on your home.

If you are like many other homeowners,you have started to work with the bank, either by yourself or through a 3rd party, to try to get the bank to agree to a modification of your current loan. But it’s taking forever, and it’s very difficult to get any response from the bank.

Suddenly, you receive a Notice of a Trustee Sale on your home, and you still don’t know if your Loan Modification is going through. What should you do?

The first thing you should do is to call your contact at the bank and ask for an extension of your Trustee Sale date. Then, you can try to push them to give you an answer on your modification. As long as your sale date is far enough out, then you’ll have time to work on your loan modification.

If they won’t extend your sale date, you may decide that it’s time to consider a short sale. In a short sale, you will still lose your house at the end, but your credit will be damaged for only two years instead of the 7-10 years of damage caused by a Foreclosure.

We can help you with this decision. Please post an answer on this blog and we are happy to discuss your situation.

Every day I visit home owners who have Notice of Defaults recorded on their property, and they say, “I want to save my house. I don’t want to consider a short sale.”

If you have received a Notice of Default on your property, you should immediately begin to learn about the options you have. First, you need to be aware that the average time from Notice of Default to the time the bank issues a date for a Trustee Sale is 90 days.  So if you want to begin work on a loan modification, you need to start right away. Be sure that you choose a reputable, ethical professional to help you with your loan modification and make sure they understand the timeframe of the banks.

If you do not receive an acceptable loan modification, then that is time to consider a short sale as your next option. If you do decide to list your home as a Short Sale, your real estate professional should be able to get the date of your Trustee Sale postponed. In the meantime, you will receive offers on your house, choose the most qualified buyer, and send in all appropriate paperwork to the bank to get the Short Sale process started.

And 60-90 days later, if the Short Sale is done knowledgeably, your home should be sold and you should never owe any more money on it.

No, you haven’t “saved” your home in the sense that you can still live in it. But you have “saved” your credit; now you will have about a 200 point deficit on your credit for 2 years, while if the house were sold at a Trustee’s Sale, you would lose about 400-500 points for 10 years.

Short Sales are a viable option, and please don’t walk away from your house without considering one. Call me, Marilyn Dashe, at Century 21 Sea Coast in Encinitas, 760-803-4304, if you’d like some more information about a Short Sale as an option.