Lately the California Legislature permitted Senate Bill 931 (SB 931) amending Code of Civil Procedure CCP 580e to supply for anti – deficiency security for proprietors of California real estate. Small sale sellers have been traditionally challenged with the chance that their lender would search for a deficiency i.e., the difference connecting the sales cost set forth in the short sale and the presented finance total.
While in several situations the undersized retailing paperwork provided by the bank offered for a waiver of the deficiency, most squat contained a notification to the retailer that the bank was retaining its choice to recover the deficiency by a battle in courtyard.
With the passage of SB 931, that went into effect on January 1, 2011, a small deal borrower that comes contained by the words of the statute no longer needs to concern that he or she will be sued by the lender for the difference among the finance balance and the business price received by the lender.
It should be noted, however, that this small sale anti – deficiency defense is afforded only to a mortgage protected by a first trust deed. Moreover, it applies only to a particular family residence which the statute defines as “a residence of not more than four units.”
There are certain limitations to this anti – deficiency consumer defense statute. The first and most significant limitation is that it does not relate to junior liens. Therefore, the holder of a note held by a subsequent trust deed would however hold the right to sue for the non – expenditure of the notice.
While this statute, on its face, may be a advantage to undersized sales in that it insulates the homeowner from deficiencies in correlation with a trade for less than the balance of the finance, there is a potential that this latest enactment will have a scary effect on undersized deals for the reason that memo holders, who can no more sue for a deficiency, will likely require superior payoffs to offset the possible recuperation that they formerly had when deficiencies were workable.