Deb Espinoza's Real Estate BLOG: The Law Giveth and the Law Taketh Away

I guess I can start this post with the age old question: I've got good news and bad news, which do you want first??

In California,effective immediately, lenders cannot pursue deficiency against the borrower in a short sale of one to four units, whether or not it is a senior or jonior lienholder. Senate Bill 458 was signed by the Governor and from this day forward no senior or junior lienholder can require a borrower to pay or owe any deficiency resulting from a short sale.

The law does not apply to corporations, LLCs or partnerships. The law does allow for the lender to negotiate for a contribution from someone other than the borrower, such as agents, lenders or relatives. The law also does not prohibit the borrower from 'offering' to pay any additional compensation to the lender 'in hopes of obtaining a short sale'.

So, on the one hand California is protecting homeowners who must short sale from being pursued for deficiency after a short sale; on the other hand the law still gives lenders the right to hold hostage other parties or the seller by requesting contribution from agent commissions or accepting the seller's generous 'gift' of additional monies to sweet talk the lender in cooperating in allowing for the short sale in the first place.

What WAS I thinking? That a law would actually be drawn just to protect a homeowner in distress without a gimme to lenders and investors who had a huge hand in creating this fiasco in the first place? Quelle suprise...