SB931: A Step Forward for California Homeowners Planning to Short Sell
Quiet but effective. SB 931 passed unaninomously by both California houses, was signed by the Governor on September 30, 2010.
The bill, which will add a new section to the Code of Civil Procedure, Section 580e, is designed to provide relief to homeowners who are underwater on their first deed of trust but are uneasy about short selling their home since the lender is threatening to pursue a deficiency judgment for the remainder due on that first.
SB931 adds language which essentially says that a lender who consents to a short sale waives any right to pursue a deficiency on a first deed of trust for that property. It does not apply to second deeds of trust, but its language clearly includes all types of first deeds, even those resulting from a refinance. Doesn’t include deeds that were obtained through fraud or false pretenses.
What does this do for the industry as a whole? It provides certainty. Certainty about one more problem that homeowners, borrowers, and real estate brokers face. The more we replace confusion with certainty in this market, the closer we get to moving forward.
Here is the text of the bill.