A brief overview and highlights of the California Senate Bill

  There is a new California law that will protect homeowners while pursuing short sales by prohibiting first and secondary lien holders from going after sellers for money owed after the short sales close.

 SB 458 reinforces protections offered by a previous law, SB 931, which only required the first lien holder in a short sale to accept an agreed-upon payment as the full payment of an outstanding loan balance.

 This new law, which became effective immediately, now prohibits secondary lien holders (junior lien holders) from pursuing deficiencies after a short sale closes.  This new law effectively provides that any lender that agrees to a short sale must accept the agreed upon short sale payment as full payment of the outstanding balance of all loans.  By extending anti- deficiency protection to all existing loans on a home when a short sale occurs, homeowners are given the option to use a short sale as an alternative to foreclosure or bankruptcy.  In addition, this measure will clarify that this rule applies only to residences.

You can click here to read the CA Senate Bill in it's entirety

• The above article is for information only.  Consult with a tax professional for any tax advice.

Copyright ©2011 John Calvo. All rights reserved.

John Calvo is a California licensed real estate broker associated with Lighthouse Realty Associates.  CA DRE # 01208146