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Elizabeth Weintraub

New Law SB 458 Prohibits Deficiencies on California Short Sales

By July 22, 2011

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California Governor Jerry Brown signed SB 458 into law last week. SB 458 morphed from its inception as a rebirth of SB 1178 into an anti-deficiency law for short sales. All mortgages, first, second and subsequent mortgages fall under SB 458. SB 931 was about a first mortgage, but it offered no release of liability for junior mortgages. SB 458 closes that loophole.

It will amend California Civil Code 580e with regards to a short sale only. It does not apply to foreclosures. It also prohibits a lender from demanding a seller contribution as a condition of short sale approval. SB 458 applies to one to four-unit dwellings in California, but they don't have to be owner occupied.

I predict that banks will still ask for a contribution, though. Maybe they just won't put it in writing. They will probably try to break the law, because who will slap their hands? There are no short sale police. Plus, title companies will bear more liability.

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At the time of writing, Elizabeth Weintraub, DRE # 00697006, is a Broker-Associate at Lyon Real Estate in Sacramento, California.

Comments

July 26, 2011 at 3:36 pm
(1) Linda says:

I’m curious about the statement that the title companies will bear more responsibility. After reading the bill I don’t see anything mentioned about title companies. Can you elaborate? Also, if the seller has already signed the letter accepting a deficiency amount being sought, but have not closed escrow, can they be held accountable for the deficiency. Thanks.

July 26, 2011 at 3:45 pm
(2) Elizabeth Weintraub says:

Title companies are concerned because of title insurance. They are closing a transaction that may or may not be in compliance with state law and want to relieve themselves of that liability.

If a seller has signed a letter agreeing to a deficiency but has not yet closed, the seller might want to get legal advice and request a revised approval letter. Some banks, such as Bank of America, are already sending out revised approval letters removing the deficiency language from them, without even being asked.

July 27, 2011 at 8:07 pm
(3) Holli says:

How will this new law play out on the Federal Level?
Thank you

July 27, 2011 at 8:10 pm
(4) Holli says:

Sorry, to be more specific, are there any changes at the Federal Level because of California’s changes?
Thank you

July 27, 2011 at 8:16 pm
(5) Elizabeth Weintraub says:

This has a bearing only in the state of California. How SB 458 plays out depends on how it is interpreted, and right now everybody has different interpretations. Personally, I think it will hurt short sales more than help them.

July 28, 2011 at 1:30 am
(6) emil says:

nice info thank you

July 28, 2011 at 3:41 pm
(7) Larry in SC says:

The simplest way to assure compliance with the bill which includes title insurers lowering claims from the equitable risks of DJ’s is to insist that the security agreement (note) be endorsed as paid in full by the lender or authorized loan servicer and surrendered at closing.

As a practical matter, DJ’s are usually are discharged in subsequent bankruptcy proceedings historically.

July 28, 2011 at 3:46 pm
(8) Elizabeth Weintraub says:

Ain’t gonna happen in California. Right now what title companies are doing is sending notice to the banks that SB 458 has passed, that the banks might be violating it and letting the banks know that by moving forward they are releasing from liability the title company and agreeing to reconvey, regardless.

July 30, 2011 at 12:50 pm
(9) Sydney says:

We have had an offer in on a short sale since April. There is a first (Chase) and the 2nd is PNC. Everything was approved and we got an appraisal done. The appraisal came back saying the home was $100k less than what we offered. We went back to Chase with our appraisal and our new offer. We just got the approval yesterday. They agreed on the price we asked for, kept the commission the same to the realtors and their contribution to the 2nd the same. We were thrilled that all the waiting paid off! The sellers had an approval letter from the 2nd for an amount with the deficiency blurb in the letter (which was all prior to the new law taking effect). They called and left a message for PNC Bank because they want to make sure even though they agreed to the letter, that PNC can no longer come after them. They left a message. I called PNC Bank myself (just to the short sale department and got some random negotiator) and asked the same questions. He said the letter is null & void because the letter was based on the fact that PNC could come after them for the remaining balance. Since they can no longer do that, they would redo the letter without that deficiency information but the price for the amount they want would be at least 40-50%. Can they do that? They already agreed on an amount. Doesn’t seem fair and seems like the bank, in this case, PNC would have to honor that amount since it’s already in writing that they would release the lien for that specified amount. Do you know about this situation where the all the approvals are in place, we are in escrow — it’s ready to go but now PNC says they need to renegotiate their amount they want? Any insight would be appreciated.

July 30, 2011 at 12:57 pm
(10) Elizabeth Weintraub says:

Yes, I have heard of this happening with PNC. But any lender can, at any time prior to recordation, change the terms of an agreement because the lender makes the rules.

This is not a foreclosure. This is a voluntary action on the part of the bank. It is not required to grant a short sale.

Furthermore, to add more insult to injury for you, if it makes more sense for PNC to pursue recourse after a foreclosure, that’s exactly what PNC will do. Under those circumstances, it might not grant the short sale at all. It’s in the business to make money. That’s the part consumers overlook.

SB 458 didn’t do us any favors in these instances.

July 30, 2011 at 1:08 pm
(11) Sydney says:

I totally get it. You would think they would take something rather than nothing though. PNC will make nothing on this deal. The seller will foreclose and then file for bankruptcy which means they get no money. You would think the agent/seller would have gotten a letter stating the terms are changing etc and then taking off the clause about the deficiency.

Is there an issue using the original letter since it states they will release their lien and they haven’t heard from them anyway? I don’t think the seller should even contact PNC and leave well enough alone. I guess we could go to title and then it all fall apart anyway.

July 30, 2011 at 1:14 pm
(12) Elizabeth Weintraub says:

Hello Sydney: Obviously, I cannot interfere in your transaction or even give you my opinion about what you should do because you have an agent representing you.

I can say that many of my sellers are closing on their original short sale approval letters. Some are asking for changes, but the majority just want it over with and don’t give a hoot about SB 458.

Also, there may be provisions in the PSA that make it more profitable for PNC to foreclose, even if the seller files BK.

August 2, 2011 at 12:27 am
(13) Angela says:

Hi- I have lived in my condo for 10 years and am underwater like most people are these days…I would say to the tune of $60K. It is too small for me my 2 kids and husband and we have completely outgrown it. I have never been late on payments and can afford the home so wouldn’t qualify for HAMP. I am in the process of purchasing another home and am in escrow. I would like to short sale the existing condo I am in now. I want to know if I might have tax ramifications because the condo will no longer be my primary residence?. Can they (the IRS) come after me later for taxes on the deficiency or will this bill prohibit that now? I think renting the condo would be a burden financially since we would have to carry some rental costs out of pocket every month so I think short sale would be more beneficial financially as long as they won’t come after me later for taxes. What are your thoughts?

August 2, 2011 at 9:26 am
(14) Elizabeth Weintraub says:

Hello Angela: I am sorry to say this but it looks as though you are headed for foreclosure if you stop making your mortgage payments on that condo. Your bank is unlikely to grant you a short sale because you have no hardship and you just bought a new home; therefore, if you no longer want the condo, it’s foreclosure or deed-in-lieu as your options. The DIL might not be possible either.

SB 458 deals with deficiencies. The IRS deals with taxes. The two are not synonymous. If I’ve ever seen a person in a vulnerable position who truly needs legal and tax advice, it is you. You can’t get legal and tax advice from a real estate agent. You should speak with an accountant / CPA and a lawyer. Quickly.

August 2, 2011 at 5:13 pm
(15) Yvonne Crenshaw says:

Is this bill retro active?
I have a client that has been paying a collection agency for almost 3 years because the 2nd lender sent it on to collections. Is shows as being charged off on their credit report, same as the first loan.
Collections wanted $1200 a month, client talked them down to $300 and now they are only paying $100 a month since that is all they can afford.
Can they stop making the payments?

August 2, 2011 at 8:38 pm
(16) Elizabeth Weintraub says:

Sorry, SB 458 is not retroactive. It went into effect the day it was signed, which I believe was July 15. Except everybody is saying Jerry Brown was not in town that day.

August 3, 2011 at 9:36 am
(17) Yvonne Crenshaw says:

I imagine this will cause quite a stir amongst the people who did short sales and still have their 2nd lender after them when it is now no longer legal if they have approved the short sale. I don’t see how it is fair for everyone prior to SB 458.

August 3, 2011 at 10:23 am
(18) Elizabeth Weintraub says:

You’re probably right, Yvonne.

August 3, 2011 at 12:54 pm
(19) Yvonne Crenshaw says:

Spoke with my clients and they are really upset. They feel jilted by the government.

They have done everything they can to keep from claiming bankruptcy. Trying to do the right thing.

This new bill gets passed that is supposedly for everyone in CA, but doesn’t apply to them!

With the economy the way it is and people struggling to stay a float and have a second mortgage that will not go away. Unsecured loans for huge amounts that they have to pay or be forced to claim bankruptcy to get rid of them.

Really now! How is that helping our economy.

August 3, 2011 at 12:55 pm
(20) Yvonne Crenshaw says:

Sorry, had to say it. Venting

August 3, 2011 at 6:03 pm
(21) Elizabeth Weintraub says:

So, Yvonne, we should make every new law in California retroactive? Where do you draw the line?

August 3, 2011 at 7:44 pm
(22) Corn says:

Does the short sale law apply to motorhomes as well? Motorhomes are allowed to be considered as 2nd homes for tax purposes so not sure if these laws cover short sales of motorhomes as well….

August 3, 2011 at 9:48 pm
(23) Elizabeth Weintraub says:

I have no idea. I imagine not because they are not considered real estate. But I am not qualified to answer that question.

August 4, 2011 at 7:40 am
(24) Yvonne Crenshaw says:

I know Elizabeth, you are right. The line has to be drawn somewhere.
It is hard because I see soo many people out there trying to make it. Even harder when there is a collection agency breathing down their back, when they have already lost their home. Fourcing many to go BK.
This new bill is great, but many were left behind.

August 4, 2011 at 5:01 pm
(25) Lisa says:

With this new law, can the second lender still give the seller a 1099S for the balance owing?

August 4, 2011 at 5:07 pm
(26) Elizabeth Weintraub says:

Why not? A 1099 is not a deficiency. It means debt was forgiven, and the IRS is notified.

August 4, 2011 at 10:21 pm
(27) Joe Lincoln says:

Elizabeth,

I saw that you said the law isn’t retroactive. My shortsale was a year and a half ago. But there have been NO collection efforts until the week before this bill was signed. Could Bill 458 apply to me since there has been no agreement between me and a collector as yet?

I read the legal written version of the bill, it doesn’t state that it’s retro, but also doesn’t state that prior shortsales are exempt. The only thing it states is that effective immediately, junior lenders cannot pursue collection of a balance.

?

Joey

August 4, 2011 at 10:29 pm
(28) Elizabeth Weintraub says:

The bill does not affect short sales that have already closed prior to its effective date. Sorry.

August 7, 2011 at 2:34 pm
(29) CCRanger says:

What a potentially wasted effort. Have been following this bill since inception when it was touted as a replacement for sb 1178 relating to deficiencies after foreclosures and somehow it got morphed into effecting seconds on short sales only. Seems to me banks would have been forced to do more short sales if left as intended but now could actually make short sales less likely to be approved. Very discouraging for those of us upside down in our properties and scrambling to make ends meet in this dismal economy.

August 7, 2011 at 10:08 pm
(30) Elizabeth Weintraub says:

I agree with you. I have some banks now who are pulling out of short sales all together — others like Bank of America are towing the line and reissuing their short sale approval letters without the deficiency verbiage. But in the long haul, I think we’re worse off.

August 15, 2011 at 6:13 pm
(31) Jennifer says:

Elizabeth – I contacted Senator Corbett’s office (author of the bill) and they confirmed that this law DOES apply to short sales prior to the passage date of the bill. Where did you get the information that this bill is not retroactive?

August 15, 2011 at 6:38 pm
(32) Elizabeth Weintraub says:

I am afraid you are confused. SB 458 takes effect on the day it was signed, which was July 15, 2011. If your short sale closed before that, it is not covered under this provision. You should get legal advice.

August 18, 2011 at 11:56 pm
(33) Chris says:

“It also prohibits a lender from demanding a seller contribution as a condition of short sale approval”

Does this mean that the 2nd lender can not accept payment from the seller either outside of escrow or in escrow to get them to release the lien? I was told by a 2nd lender that they cannot accept any funds with respect to a short sale unless it is stated on the final Hud. Prior to this bill they would have accepted a payment(or promissory note) along with the 3K from the 1st for approval.

August 19, 2011 at 9:39 am
(34) Elizabeth Weintraub says:

There are lawyers in California who will tell you that it is OK for the seller to make a contribution under these circumstances because the law is too vague. You know how lawyers are, they can argue any viewpoint. They can argue about whether the contribution is a “condition,” and they can argue about the definition of proceeds.

Contributions are shown on the HUD, yes. If a seller made a contribution and did not reflect it on the HUD, I am told it could be construed as defrauding the first lienholder. It’s always best to get legal advice and hold your lawyer accountable for that advice.

August 30, 2011 at 3:30 pm
(35) The Yolo Pro says:

“I predict that banks will still ask for a contribution, though. Maybe they just won’t put it in writing.”

I think that this is a good call. I am a real estate appraiser and came across a short sale just the other day. After quizzing the realtor he told me that the buyers are contributing $7,000 (roughly 1.7% of the sale price) toward the payoff of the second mortgage. I had never seen anything like this before. Coincidentally, I came across an article about this bill today, which I had not heard about before, and this “reverse” concession (most concessions are usually made by the sellers) suddenly seemed to make sense.

August 30, 2011 at 3:34 pm
(36) Elizabeth Weintraub says:

The problem with the buyer paying the concession is sometimes the buyer’s lender won’t allow it. Not to mention, not every buyer has excess cash lying around.

August 31, 2011 at 4:03 pm
(37) Debbie says:

The only people I can see who will benefit by this new bill are the attorneys. Seconds are not approving short sales leaving the clients to foreclose and file for bankruptcy. I would not be surprised if the attorneys paid to get this bill through. They are most likely the force behind MARS too but then realized that short sales are a lot of work. I just find it peculiar that only a few days after SB458 was passed there was a forbearance put on MARS.

September 8, 2011 at 3:48 pm
(38) Tina says:

I bought a house in CA in 2004 as a primary home (80, 15, 5 loan), refinanced in 2005 to consolidate loans (still as my primary home) and did not take any money out. I moved from the location in 2007 and have been renting out the property since. I paid off the small HELCO in 2008. The value has dropped from $311K to ~$150K. I am trying to short sale it with an offer from a buyer of $150K in cash and the Bank asked me to pick one of the two options:
Please have the seller choose one of the below options:
1. $25,000.00 Cash contribution due at closing
2. $50,000.00 promissory note, 0% interest, amortized over 100 months.
If the seller would like to proceed, please provide a signed letter agreeing to ONE of the options above.

Is it legal for them to ask me this?

September 8, 2011 at 6:44 pm
(39) Elizabeth Weintraub says:

With the exception of Bank of America, banks are asking for contributions and ignoring SB 458. You could consider notifying the Attorney General’s office, but then you wouldn’t have your short sale. What does your agent have to say about this, and why don’t you get legal advice?

September 9, 2011 at 1:27 pm
(40) Tina says:

According to the CAR attorney, the bank is allowed to do this as the offer does not cover the short sale requirements. This does not make sense as they should ask me to resubmit a better offer and turn down the short sale instead of ask me to contribute cash. Since i have very few options with my refinanced loan (i.e. i cannot foreclose), i have put the property on the market for a higher amount to see of there will be a better offer. In parallel I am seeking a local attorney to see of I can counter the bank’s request for cash. I am trying to do this less aggressively with the worry that the bank has more power than they should as they may know that i have less options.

Someone should resubmit SB 1178 that will allow for options to owner who refinanced and we responsible about the refinance and did not take out money. Esp. as most owners, including me, were not told that the refi will change the purchase money to hard money and hence will change from non-recourse to recourse.

September 9, 2011 at 1:44 pm
(41) Elizabeth Weintraub says:

I hope you get a higher offer, Tina. If not, in 3 months, the BPO will expire and you can probably try again. Banks want market value. Perhaps your offer is not at market value?

September 9, 2011 at 2:26 pm
(42) Tina says:

My agent did a comp analysis before we put it on the market initially and we were close. We put it on the market for $169K and got an offer for $150K. I suppose we should have waited for more offers but we now have is back on the market for $179K (above the 150K+25K cash request). Keeping fingers crossed.

Do you know if there is anything in the works that will allow foreclosures on refi loans (with no money out like SB 1178)? I would be nice to know that I have a foreclosure option instead of being at the mercy of the bank.

September 9, 2011 at 2:39 pm
(43) Elizabeth Weintraub says:

Sometimes, it is more profitable for a bank to foreclose than to grant a short sale. Depends on the PSA, and they don’t share that with you. It is also possible your loan has MI. The bank’s particular demand makes me suspect MI.

I do not know of any protection for rate / term refinances. California should have pursued 1178 and not passed 458 at all.

September 9, 2011 at 2:48 pm
(44) Tina says:

Sorry for the basic questions:
What is PSA and MI?

Thanks a lot for the comments!

September 9, 2011 at 2:51 pm
(45) Elizabeth Weintraub says:

PSA is a pool servicing agreement.

MI is mortgage insurance. Even if you didn’t take out mortgage insurance, some banks are taking out MI after the fact and paying for it themselves without telling the homeowners. Then, MI must approve the sale, and the types of demands made by MI are grossly huge amounts of cash or double the amount in a prom note.

September 9, 2011 at 5:55 pm
(46) Ginny says:

I’ve had to move out of my home due to financial hardship, does this bill cover me in the event this is not my primary residence?

September 9, 2011 at 7:29 pm
(47) Elizabeth Weintraub says:

SB 458 applies to all mortgages for 1 to 4 units, recourse or non-recourse, owner occupied or non-owner occupied.

September 10, 2011 at 6:48 pm
(48) Riverside Guy says:

Bought a house 465k in 2007 100% financed through 2 loans from chase– a first for 365k and second for 100k for second. Did a short sale in 2010 for 265. Got the first cleared but the second was sent to collection despite it being non-recourse money for the original purchase. We never re-fied the loan. Will this new law apply to get rid of the second? Is there existing law that protects us from being pursed for the 2nd loan?

September 10, 2011 at 6:54 pm
(49) Elizabeth Weintraub says:

If I were you, I’d hire a lawyer because I don’t know how Chase can go after you if you have a non-recourse loan. As for SB 458, it’s effective for short sales in July 2011 and thereafter. Not retroactive.

September 20, 2011 at 3:45 pm
(50) Carole says:

Does this new law exempt you from paying the IRS for the deficiency, as it is considered income?
Thanks

September 20, 2011 at 4:37 pm
(51) Elizabeth Weintraub says:

Taxes are a different story. For the answer to that, you would look to the 2007 Mortgage Forgiveness Debt Relief and subsequent California exemption, which I believe expires at the end of next year.

September 20, 2011 at 5:11 pm
(52) Bonnie Ember says:

Hello Everyone,

If you live in California, & do not get a Short Sale Approved,
here is a Foreclosure Law on the 2nd, if it is w/the same lender:

http://www.car.org/legal/leader-articles/deficiency-judgments-ca-law/?view=Print&url=http://www.car.org/legal/leader-articles/deficiency-judgments-ca-law/

Believe it or not, I got a letter from Chase dated Aug. 17th, 2011, offering for me, to pay them $31,000 on my 2nd.
They are Foreclosing on my home, rather than giving me a 2% interest rate.
They offered me a mod that was about 50% of our income, & had a $4500 Charge in it
for bankruptcy or foreclosure.
I refused to sign this.
They refused to let us make any more payments & put us into Foreclosure.

Anyone that wants to stop these Venomous Snakes, should pull all of their money, out of Chase Bank.

We the People have spoken.

Thank you, Jerry Brown.

Regards

Bonnie Ember

October 12, 2011 at 3:01 pm
(53) Ignorant1 says:

Elizabeth, (I hope you’re still monitoring this article)

What are your thoughts about the banks eventually trying to get both SB931 & SB458 overturned in the courts? They could argue based upon jurisdiction – that they are Federally chartered institutions, therefore the California State law is irrelevant? Or perhaps argue that the terms & conditions are grandfathered to the time of executing the Note & Deed of Trust.

Seems like after the dust settles (in regards to the current foreclosure onslaught), the banks could have a HUGE income stream by going after the Deficiency Judgments.

Perhaps those Senate bills are something of a placebo for now…

October 12, 2011 at 3:34 pm
(54) Elizabeth Weintraub says:

I think if a federally chartered bank does business in CA it must comply with the California Civil Code, and that is not an argument. But that’s why I am a real estate broker and not a lawyer.

October 16, 2011 at 2:18 am
(55) Sean says:

I read an earlier comment of yours about SB458 not being retroactive. Does that mean that I’m out of luck because my short sale was in 2009? I’m currently getting collection letters from my second lender and looking back I’ve notice that the security release note did not state “paid in full” but mentioned that I was still responsible for all deficiency thereafter. Should I seek legal advice? If so do you have any references?

October 16, 2011 at 2:20 am
(56) Scott says:

Can you explain what this mean–”SB 458 applies to all mortgages for 1 to 4 units”. Is 1-4 units referring to the number of bedrooms in the house?

October 16, 2011 at 9:15 am
(57) Elizabeth Weintraub says:

Yes, Sean, that is correct. Without release language in your approval letter, it is possible that a lender might have retained deficiency rights. SB 458 does not help any seller who closed escrow prior to July 15. You should get legal advice.

October 16, 2011 at 9:17 am
(58) Elizabeth Weintraub says:

1 – 4 units means a single-family home or condo to a fourplex and everything in between, but nothing over. For example, two duplexes fall within that realm. A fiveplex does not.

October 16, 2011 at 6:07 pm
(59) Sean says:

Is there any laws prior to 2009 that would protect short sellers from deficiency judgements from Banks?

October 16, 2011 at 6:20 pm
(60) Elizabeth Weintraub says:

To determine whether the bank has a right to demand a deficiency prior to SB 458 and outside of a HAFA, you really need to seek legal advice because it depends on your type of loan, the bank and the terms of your short sale approval letter.

November 4, 2011 at 1:39 am
(61) Jan says:

I filed bankruptcy July 6, 2011. I am waiting for the discharge notice, and had originally tried to keep my primary residence but an exorbitant income tax liability has forced me to let the house go. I have been advised to stay in the house until it forecloses, but although I haven’t heard from the lender since the Bky, I’m thinking about calling the lender and asking them to let me turn in the keys. I also was approached about a short sale but I’m afraid to because I may end up with a 1099 after the bky is over. Who should I contact to get the answer to this question? Is my understanding from reading the above blog correct in that SB458 protects me from the deficiency judgment if the lender approves the short sale? If the short sale is not approved, should I give the lender the keys? Is giving back the keys the same as foreclosure?

November 4, 2011 at 4:30 pm
(62) Elizabeth Weintraub says:

Why would you want to give the bank the keys and go to foreclosure when you could attempt to get the short sale approved? I’ve never seen a seller who has filed bankruptcy not qualify for a short sale. I have seen sellers who have filed bankruptcy and not been able to get a short sale approved because the second or third lender demanded huge sums of money, which tells me it is more profitable for some lenders to go to foreclosure. You should talk with an accountant about the 1099. Banks do send them but the 2007 Mortgage Forgiveness Debt Relief act offers a way out, as might your state laws.

November 8, 2011 at 6:45 pm
(63) Kimberly says:

Are Deed-In-Lieu covered under SB 458? I haven’t seen anything that clearly addresses this. Thanks!!

November 8, 2011 at 6:48 pm
(64) Elizabeth Weintraub says:

SB 458 applies only to short sales. A Deed-in-Lieu is not a short sale.

November 12, 2011 at 10:56 am
(65) Casey says:

We just finalized a short sale and had to be 4300.00. Bank of America was the loan for our first and second. I’m assuming this was illegal now that I read about this law. Is there any way to go back and get the money? Thank you.

November 12, 2011 at 11:02 am
(66) Elizabeth Weintraub says:

Hi Casey: If this short sale closed in California, the title company / escrow should have given you a copy of SB 458 and advised you to get legal advice. At least that’s what title companies do in Sacramento when a seller is forced to make a contribution to close a short sale after July 15th.

Of course, I cannot give you legal advice. However, if that happened to me, I would probably file a suit in Small Claim’s Court. in which I believe the limit is $10,000 in California. Yup, I’d sue the bank. No bank is too big.

November 12, 2011 at 11:31 am
(67) Casey says:

Thanks for your quick response. I think I will follow through with a small claims lawsuit. We were not given anything from the title company. When I did mention something about the law they indicated there were a lot of stipulations and people are still paying. hmmm….I was so burnt out with the process I finally gave in but I have been questioning the outcome ever since it closed two weeks ago.

November 12, 2011 at 11:54 am
(68) Elizabeth Weintraub says:

I would be very interested in the outcome. Please keep me informed, if you can remember. I would greatly appreciate it.

November 14, 2011 at 6:50 pm
(69) carol says:

Does this law apply to credit unions? Meaning I’m currently paying on a promissory note that was issued by my credit union to pay off my second.

November 14, 2011 at 7:36 pm
(70) Elizabeth Weintraub says:

If your note was signed after July 15 of this year, you might want to speak with a lawyer.

February 6, 2012 at 10:56 pm
(71) sheri65 says:

Thank you for these posts. One of the comments referred to the Mortgage Forgiveness Debt Relief Act. After looking this up, the IRS link provided a lot of answers to my questions I still had. I am now hopeful to file my 2011 taxes. Still crossing my fingers, but now hopeful.

February 10, 2012 at 1:06 pm
(72) Bob says:

Can a bank pursue a deficiency against me on a purchase money mortgage on a 2nd home?

February 10, 2012 at 1:49 pm
(73) Elizabeth Weintraub says:

I cannot give you legal advice but I can tell you that Civil Code 580e applies to loan amounts forgiven in a short sale on 1 to 4 units, regardless of whether they are purchase money or hard money or you are an investor or owner occupant. But if you go to foreclosure, that is a different story. Far as I know, you can have only one personal residence, but you should get legal advice.

February 15, 2012 at 10:23 am
(74) jeanette says:

I live in California and I have a recourse loan with a credit union in my original home. I got married and moved in with my husband and my house is underwater to the tune of 70K. I had refinanced the mortgage at some point and that changed the loan to a recourse loan, but don’t have a 2nd loan on the property. My question is, if the bank agrees to a short sale, they will not seek deficiency in the future, correct?

And if the short sale doesn’t happen and we do a non-judicial foreclosure, can the bank still come after the difference? My understanding based on what I’ve read is as long as it’s non-judicial foreclosure, they can’t come after the difference based on the one action rule.

February 15, 2012 at 5:17 pm
(75) Elizabeth Weintraub says:

I hope it’s not The Golden 1. They have not been my favorite credit union to work with. Under CA Civil Code 580e, they are not allowed to pursue you but that law could change. That is why I advise my sellers to get a letter releasing them from liability and to get legal advice.

March 2, 2012 at 7:14 pm
(76) Pamela sales. says:

Have you heard about a possible change in the California law being proposed for next year that would allow the IRS to collect taxes on the deficiencies in short sales.

March 4, 2012 at 12:21 pm
(77) Elizabeth Weintraub says:

Yes, you are talking about the sunset date of December 31, 2012 for the 2007 Mortgage Debt Forgiveness Act. It might be extended, it might not.

March 8, 2012 at 12:08 pm
(78) PatrickLA says:

So if my house short-sells before the end of the year, I shouldn’t be getting a tax bill on the deficiency? That would kill me!

March 9, 2012 at 11:34 am
(79) Elizabeth Weintraub says:

Depends on the price of your home, whether it is 1 to 4 units and if it is your personal residence, Patrick.

March 18, 2012 at 5:58 am
(80) ret says:

Hi Liza, I live in bay area. We are in short sale due to foreclosure. Short sale approved by wellsfargo. We only have one mortgage. Auction sale is 456k total they add the 2yrs we didn’t pay due to loan mod took 2yrs until denayed.. listing price 295k that’s what the lender ok to sell. Listing will end on this 28.. No offer yet as of now. If we do and accept by the lender for 295k. U think all the difference the lender will put it as loss? I’m worried about the 2yrs we didn’t pay 40k. I’m I better situation if I’m approve by Hafa? Thanks

March 18, 2012 at 12:19 pm
(81) Elizabeth Weintraub says:

SB 458 says any bank that approves a short sale in California must release you from personal liability for the difference. I know it’s hard to wrap your head around the fact you might owe more than $400,000 with back payments added in and it all goes away, poof, vanish. But it does.

March 18, 2012 at 5:58 pm
(82) ret says:

Ok great! big relief Liza thanks. Actually I’m bugging my realtor to put us in Hafa program to be real safe..

Added question we live here for a long time memories, good location, accessibility u name it etc.. If investor buys the house is it legal if we will the one to rent it? Very hard feelings to move especially my kids.

Also if u can clear this in my head we refi 4times before cash out buy car fix the house because those yrs. Every yr we accumulate equity. Until the last refi we cannot get anymore money but we had it refi for one loan which is now. This my second question do I need to worry for those previous cash out refi or its erase in one loan now.. Thanks again God Bless you :)

March 20, 2012 at 3:18 pm
(83) Elizabeth Weintraub says:

Your agent can’t put you into HAFA. You have to qualify and qualifying is different from being eligible. You can ding around trying to get into HAFA and never qualify. HAFA is for people who are flat out broke.

You should also get legal advice because an agent cannot give you legal advice. Not even an agent on a famous website.

April 23, 2012 at 1:04 pm
(84) Dawn says:

Elizabeth- I read the requirements for HAFA and HAMP. Is the $729,500 for both the 1st and 2nd added together? We owe $576,000 on the 1st with Aurora and $198,000 on the 2nd with PNC for a total of $774,000. So are we out of luck? We purchased property for $891,000 in 2005.

April 23, 2012 at 1:44 pm
(85) Elizabeth Weintraub says:

The limit for HAFA is $729,750 for a FIRST mortgage. Your first mortgage is less so you should be eligible. Whether you qualify is another story.

But that’s not the bad news. The bad news is you have a second loan with PNC, which will probably cause you great heartache, not to mention, PNC might not allow you to participate in HAFA.

May 3, 2012 at 9:52 pm
(86) DT says:

Hello Elizabeth,

With the July, 2011 California law in effect that releases deficiency liability (in a short sale situation) on both a 1st and 2nd loan, do you know whether a mortgage insurance company can come after you? I just had a short sale approved (no paperwork received yet) … whereby it was the mortgage insurance company who was charged with making the final approval decision on the short sale. It was approved, and while I know that the lender cannot go after you (Calif. Civil Code 580e) … I would like to know whether the mortgage insurance company could.

Thanks in advance!

May 3, 2012 at 9:58 pm
(87) Elizabeth Weintraub says:

The mortgage company signs off on the approval but that is not an approval we receive on the borrower’s end. The borrower’s lender releases the borrower. The mortgage company insures the lender.

May 4, 2012 at 1:19 am
(88) Gail Smyth says:

You mentioned that it is sometimes more profitable for a bank to foreclose than to grant a short sale, depending on the PSA. What would the provision in the PSA be that would provide an advantage to the servicer or the investor to foreclose? I have been puzzled when lenders refuse to accept a good deal on its face and have often suspected there is information of which I am unaware that makes it more attractive to do the foreclosure.

May 4, 2012 at 9:14 am
(89) Elizabeth Weintraub says:

PSAs provide payment for foreclosure activities in many different ways. Sometimes, it makes more money through those activities over the short sale.

However, sometimes lenders refuse to accept “a good deal” because the person in charge of the refusal is confused or does not understand. Education is sometimes required as well. Don’t ever underestimate the power of lack of information.

June 6, 2012 at 12:00 pm
(90) raul reyes says:

does CA Senate Bill 458 covers second home or investment property?

June 6, 2012 at 4:20 pm
(91) ELIZABETH WEINTRAUB says:

Yes, SB 458 applies to non-owned occupied homes as well, 1 to 4 units.

June 11, 2012 at 7:18 pm
(92) Virginia says:

Hi Elizabeth,
We are currently working to get our short sale approved through Chase. We have a first & second; both with Chase, both purchase money, no refis.
If they approve the short sale, is it imperitive to have paperwork signed that explicitly states they are releasing us from deficiency on both loans? Or does SB 458 make this unnecessary? In other words, is there a possibility that Chase will try to sneak in language in the letter that will somehow exempt us from SB 458 if we sign?
Because both our loans are non-recourse, I originally wanted to just foreclose to be certain we were safe from deficiency & not have to deal with the bank. But now that we are short selling, Im a little edgy. I’m mortified by the idea of losing anti-deficiency protection.
Thx in advance for your response :)

June 11, 2012 at 7:31 pm
(93) Elizabeth Weintraub says:

It doesn’t really matter what I think. It matters what a lawyer thinks, and there is no substitute for legal advice in a situation like this. I will tell you that in California I generally see Chase put verbiage into its approval letters that releases sellers. You should ask a lawyer to review your short sale approval letter when you receive it.

July 14, 2012 at 10:36 am
(94) Sam Brown says:

I’ve been trying to Modify my loan with BofA for almost two years now with all kind of BS and run around with them. I’m thinking of short selling because of all the BS with them.

I had a Real Estate agent come to my door and she stated that if I don’t sell now, there is a new law coming in effect that would make me financially responsible for all the back payments I’ve missed.

Is this true? Should I sell now?

July 14, 2012 at 11:26 am
(95) Elizabeth Weintraub says:

I think you should talk to an experienced short sale agent apart from some random person sent to your door by Bank of America. I also have not heard of any such pending legislation but the 2007 mortgage forgiveness debt relief act is set to sunset on December 31st of this year. They are working on an extension. You might also want to get legal advice.

There is a new incentive program offered by Bank of America called the HIN Incentive, which is in addition to the Cooperative Short Sale relocation incentive. You might want to check that out. It’s cash payments for doing a short sale. Not every agent knows how to do these. Ask around and find an agent who has done a few of the Cooperatives. That person can help you to find out if you qualify.

July 14, 2012 at 12:42 pm
(96) Jason says:

I bought a condo in 2005 with a 5/1 and lived in it as my primary residence for 4 yrs. For job reasons, I moved away in 2009 and began renting it. We rent to $900 less than our expenses to keep the property. We refianced in Jan 2010 into a 30-yr fixed. We recently attempted a short sale with Chase but it was declined because they said we have no financial hardship. We make a significant living and have significant assets and can afford the property. But we no longer want to make payments for a losing investment that has no hope of recovering soon. The BPO came in at $250K. We bought at $420 and owe $320 on our mortgage.

We are trying to make the hard decision to strategically default. Can I stop making payments and hope that Chase will take my short sale application more seriously? If I short sale, can they issue a deficiency judgement? If they do not approve the short sale, can I foreclose without them going after my other assets (bank accts, retirement, cars etc?) Will I have collectors making my life hell? How long will this be on my credit history? My credit score is over 800 now. What can I expect it to fall to?

July 14, 2012 at 1:06 pm
(97) ELIZABETH WEINTRAUB says:

I closed a short sale with Chase that was initially rejected due to no hardship, even though the sellers were 6 months delinquent. But that was just a lucky break for those sellers, primarily because they had purchase money loans so the bank understood it could not pursue them after foreclosure. But in your case, your loan most likely is recourse. If it was a cash-out refi, it’s even worse. You should get legal advice about this before you consider any next step. If the bank agrees to a short sale, under SB 458 it gives up the right to pursue you. Foreclosure, however, is another story. There aren’t too many breaks available for people in your situation, having the financial wherewithal and ability to make the payments but, for logical and sound financial reasons, choose not to.

July 18, 2012 at 4:05 pm
(98) Scott Tanner says:

I am in the process of purchasing a short sale home in California. The roof has a leak in it and the home is sold as is. It has started escrow after four months and i am wondering if it is a bad idea to have the roof repaired before it closes? Also the approval letter on the second loan has the wrong offer amount on it and i am wondering if this will cause a problem with it.

July 18, 2012 at 4:05 pm
(99) Scott Tanner says:

I am in the process of purchasing a short sale home in California. The roof has a leak in it and the home is sold as is. It has started escrow after four months and i am wondering if it is a bad idea to have the roof repaired before it closes? Also the approval letter on the second loan has the wrong offer amount on it and i am wondering if this will cause a problem with it.

July 18, 2012 at 4:22 pm
(100) Elizabeth Weintraub says:

You need to talk to your agent and get that kind of advice from your agent. Other real estate agents such as myself are not allowed to interfere in another’s agent’s transaction.

Sometimes, it is a good idea to fix stuff before closing and sometimes it is not.

Approval letters need to be correct or escrow might not close without a revised approval letter.

August 5, 2012 at 1:47 pm
(101) Ann says:

Under CA code of civil procedure, does Deed in Lieu of Foreclosure have any anti-deficiency protections? If so, what are they? I have 2 loans, both purchase money, owner occupied, and single unit dwelling. Thanks.

August 5, 2012 at 2:38 pm
(102) EliZABETH WEINTRAUB says:

SB 458 does not apply to foreclosures nor to deeds in lieu of.

September 15, 2012 at 9:58 am
(103) Christine Papworth says:

Elizabeth, I close over 100 short sales annually. I have found SB458 to be a great aid since it passed. Now, there is all of this misconception that SB458 is sunsetting at the end of the year…so much so I am beginning to doubt myself. Is there a sunset date on the bill that you are aware of?
I believe people are getting The Mortgage Forgiveness Debt Relief Act that sunsets 2012 mixed up with SB 458 Please tell me I’m correct in this.

September 15, 2012 at 10:19 am
(104) Elizabeth Weintraub says:

Yes, they are mixing it up. SB 458 amended the California Civil Code 580 by adding paragraph e, and it is a permanent change. SB 458 has been somewhat of a prickly thorn, there are good things and bad things about it.

October 10, 2012 at 11:56 pm
(105) Melissa says:

Elizabeth – we were approached by our lender-wells fargo-to do an “internal” no cost refi. We are current, but upside down. Our LTV is 164%. If we refi now, would we be able to short sale in the future if necessary? Also, i heard they extended the Mortgage Forgiveness Debt Relief act to the end of 2013. Can u verify this? Thank you.

October 11, 2012 at 8:50 am
(106) Elizabeth Weintraub says:

Wells Fargo is very unlikely to approve short sale after it makes you a new loan. Most of the WF short sales I deal with are for sellers who have a hardship. The mortgage debt forgiveness extension has not yet passed the House.

October 11, 2012 at 9:58 am
(107) Melissa says:

Thank you for the response. The reason I ask is we might have to relocate because of my husbands job, in the near future. If this occurs, might they approve a short sale because we would not be able to afford to pay for two residences.

October 11, 2012 at 10:43 am
(108) Elizabeth Weintraub says:

It will depend on whether WF views the transfer as a hardship. If the bank believes you can pay on two homes, the bank will probably expect you to continue to pay on two homes.

October 16, 2012 at 6:51 pm
(109) Liz says:

Hello Elizabeth, I came across your posting could you give me your thoughts on what you would do in our situation. We can no longer afford our home, we have two loans, one with Wells Fargo and the other with a company we don’t even know now, we haven’t paid on it for 4 years. Our house is under about 120k. Wells Fargo worked out with us 2 years ago a repayment plan (I lost my job and we got behind on our payments) now we are in the same bind and can no longer afford the payment, WF told us they can not offer us any solutions. We are behind 4 months. Would short sale work for us? We are confused and don’t know where to start and don’t have any money to seek an attorney. Any help would be great.

October 16, 2012 at 7:21 pm
(110) Elizabeth Weintraub says:

Many people with two loans don’t bother paying the second when the first is under-water because the second usually won’t do anything. Your best bet is to discuss your situation with a short sale agent — somebody who closes a lot of short sales and in particular has done WF short sales. You sound like you will qualify for a short sale to me, but I am not your agent, and I’m not looking at your entire picture, so I can’t really advise you.

October 21, 2012 at 7:32 am
(111) Flat broke says:

Hi, my home goes to auction in 4 days. I’m in foreclosure and all of my documents were finally accepted for the HAMP program on Friday. As far as I know, they are supposed to postpone the sale date once they review my file to see if I qualify. However, there isn’t any guarantee. If our home goes into auction on Thursday, we will not have enough time to move, and no money to move with.
So I panicked and contacted a realtor to help put my home in shortsale. My hope is to put in a shortsale package to delay the auction, so my family and I have time to move. Also, if I do not qualify for HAMP, I will qualify for HAFA and they will give my $3000 to relocate. Here’s my problem. My realtor wants to charge me $1500 for the shortsale. She wants me to pay out of pocket from the $3000 relocation fee. I need that money for a deposit so I can move. Does SB485 prevent her from charging me this fee? I don’t know what to do, it doesn’t make sense to pay this fee. She says the money goes to her shortsale person to handle all of the paperwork and talking with the banks. $1500 for paperwork sounds overpriced to me.

October 21, 2012 at 11:39 am
(112) Elizabeth Weintraub says:

There are “advance fee” agents who charge sellers upfront to do a short sale, but they have to comply with so many regulations that very few tend to do it because the regulations are complex. Also, the Department of Real Estate and the Consumer Financial Protection Bureau tend to be very interested in these activities. Mortgage Assistance Relief Services is regulated. Most real estate agents who specialize in short sales do not charge the seller an advance fee but instead accept payment from the proceeds of sale (not from your pocket).

October 23, 2012 at 2:29 pm
(113) Lisa says:

Hi, just wondering if SB458 applies to a second “equity line of credit”? Durring the short sale process, the seond loan (home equity line) has been sold from the bank to collections… NICE! I realized that if the collecton company, does not get what they want, they can possibly not approve the short sale. However, if they do approve the short sale, since it is an equity line and not a traditional second, does SB458 cover the seller from any future obligations?

Also, if the deal closes before year end, does the Debt forgiveness Act also exempt them from paying taxes on the defieciency for the equity line? Thanks very much.

October 23, 2012 at 3:47 pm
(114) Elizabeth Weintraub says:

Yes, SB 458 applies to a home equity line of credit. Whether you are exempt from taxation is something you need to discuss with your tax accountant. Some types of second loans are not exempt from taxation.

November 13, 2012 at 2:17 pm
(115) Matt says:

Elizabeth,

I sold my 2bdrm condo via short sale in 09 in CA. The 2nd(Chase Heloc) is after me for the deficiency.

I know SB458 does not clearly apply retroactively (altho some say it may if challenged in court), but isn’t there anti-deficiency protection in CA because the 2nd was purchase only loan (never refinanced). My understanding is that that is non recourse

Initial research is giving me conflicting answers but Chase says that that protection is ONLY for foreclosures and not short sale so I indeed owe this.

Confused

November 13, 2012 at 2:24 pm
(116) ELIZABETH WEINTRAUB says:

You should talk to a lawyer, Matt. While purchase money loans are indeed non-recourse, and that’s always my argument to a lender to accept a short sale on purchase money loans, who knows what you signed at closing. Maybe you reaffirmed the debt or gave Chase the right to pursue you? Banks have rights in short sales, and Chase might have some kind of claim. That’s why prior to SB 458 it was imperative to get a release of liability at closing. In fact, it’s still a good idea today. You need legal advice.

November 13, 2012 at 2:27 pm
(117) Matt says:

One more note to my above situation:

Chase also insists that I indeed owe this deficiency — esp since I signed the approval letter from them that had a clause “right to pursue deficiency”

I did not know that clause was there as I was rushed by my agent and the situation to get the short sale approved. My ignorance shouldn’t override pre existing protection, right? …. that is — IF I’m protected.

November 13, 2012 at 2:36 pm
(118) Elizabeth Weintraub says:

That’s an argument you’ll probably have to take before a judge, Matt. A judge might ask you if you are in the habit of signing documents that you do not read, and a judge might ask you whether your agent advised you to get legal advice, and you might have even signed something that said you were advised to get legal advice. Although it is entirely possible that you may not have felt you needed a lawyer then, you most likely do need a lawyer now. I’m so sorry this has happened to you.

November 13, 2012 at 10:10 pm
(119) Melissa says:

Elizabeth,
I posted previously questioning about SB 458 and a possible extension, and u replied, that it hasnt passed the house. Do u know if there is any new info. Thank you.

November 14, 2012 at 8:42 am
(120) Elizabeth Weintraub says:

You are probably not referring to SB 458 because that became a law last year in July. SB 458 added section E to the California Civil Code 580.

November 14, 2012 at 4:59 pm
(121) Melissa says:

You are correct, I was confused between SB458 and the mortgage debt relief act. Have there been any developments on an extension to the debt relief act?

November 14, 2012 at 5:06 pm
(122) Elizabeth Weintraub says:

I have not heard anything. But for most people it doesn’t matter because purchase money loans are exempt taxation on forgiven debt in California. But this is not tax advice. For tax advice, you need to verify with an accountant or your tax adviser.

November 28, 2012 at 10:44 pm
(123) ryan smith says:

hi,

i did a short sale on my home due to a divorce, the sale was approved on 8/11/11 and funded soon after. there was a 1st 2nd and 3 third mortgage. on march 3/1/12 i started getting collection calls from key bank recovery demanding i pay the defiency on the 3rd mortgage of 10,000.00 or else they wont continue to call me and put the account into collections, they also called and said the same to my former spouse. they indeed did put the account into collections and continue to try to collect. what legal recourse do i have under sb458 if any to stop them?.

November 29, 2012 at 9:48 am
(124) ELIZABETH WEINTRAUB says:

Let me guess, that was a hard-money loan for a pool? It is possible that you reaffirmed your debt obligation with Key Bank.

You should find your approval letter from Key Bank and take it to a lawyer. If your debt was not reaffirmed, then it’s probable that the bank is unaware of SB 458 and CA Civil Code 580e.

December 14, 2012 at 6:49 pm
(125) Elise says:

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December 18, 2012 at 7:07 pm
(126) Beth. says:

do we quilfiy? we did short sale in 2010 know Chase wants us to pay 263.000 then lower to 30.000 than 10.000 we keept telling them we did short sale ruin our credit lost every thing they send our case to collection know to work weth us they want 2 pay steiments taxes of 2 years our 401 k _ 2 bank statments and maybe we have to pay 15.000 we feel they are wrong when they pre aprube the short sale we we singd forms tey want us to be responsable for the rest of balance 263.000 dlls we keept asking the realstate we dont read or wright very much english so we didnt undestand what thats ment is any chance we quilify for the SB458 law.

December 19, 2012 at 12:49 pm
(127) Elizabeth Weintraub says:

The law was passed in July of 2011. It is not retroactive. Sorry.

December 29, 2012 at 12:58 pm
(128) Alice W says:

Does SB 458 expire 12/31/12? We started a short sale in Oct. due to needing to relocate for medical reasons and am still waiting for approval. We are wondering how this is going to affect us now that we won’t close until 2013.

December 29, 2012 at 2:21 pm
(129) Elizabeth Weintraub says:

SB 458 does not expire. You are probably mixing it up with the 2007 Mortgage Forgiveness Debt Relief Act, which is set to expire on 12/31. If it should be extended, and there is no certainty of that, it would most likely be made retroactive. Sellers in 8 states are not affected by it. For more advice, please ask your accountant.

January 6, 2013 at 2:10 pm
(130) Debbi Smith says:

What is the tax status for sellers of short sale properties (now in escrow) in this state? Thanks for any update you can provide.

January 6, 2013 at 2:15 pm
(131) Elizabeth Weintraub says:

If you’re talking about the federal 2007 Mortgage Forgiveness Debt Relief Act, it has been extended to January 1, 2014. The state provision (California) is under review for an extension at the moment.

January 8, 2013 at 3:42 pm
(132) Elizabeth P says:

Hello Elizabeth,

Due to my husband’s passing, I short sold my home, which closed escrow in January of 2010. My first mortgage was with HSBC, the second with a credit union. Even though the letter from my first mortgage indicated junior lien holders shall not receive any amount in excess of $1,000 the credit union would not agree and requested $7,500 instead. Final settlement statement shows the credit union was paid the $7,500 . I received a release of obligation letter and other documents that appear to indicate my second mortgage had been forgiven. However, three years later, I received a bill from a collection agency for the balance owed to the credit union (approx $37,000). Is this possible or do I have grounds to pursue legal action?

January 10, 2013 at 1:40 pm
(133) ELIZABETH WEINTRAUB says:

Your loan closed prior to SB 458, so CA Civil Code 580e most likely does not apply nor protect you. Sometimes, banks make mistakes and collection agencies make mistakes. To determine whether the collection agency has the right to pursue you, you may have to hire a lawyer to read and interpret the terms and conditions contained in the short sale approval letter from the credit union.

January 14, 2013 at 7:19 pm
(134) Al W B says:

I have 1st and 2nd purchase money loans, both originated at COE in 2005. 80-10-10 financing.. At one point I paid down the 2nd to 0, and then drew on the loan to make property tax payments for several years, so now the balance is $32k. Property is either going to foreclose or go short sale, I haven’t decided yet. Everything I’ve read says that 580b applies whether or not the 2nd was paid down because it is secured by the same note and therefore is still a non-recourse loan. What do you think? Might the bank (WF in this case) huff and puff and say the loan became recourse when I zeroed the balance? Might 458 offer me an assured outcome (no deficiency) rather than foreclosure where WF might try for a deficiency judgement? Thanks.

January 14, 2013 at 8:29 pm
(135) ELIZABETH WEINTRAUB says:

Interesting. I suspect your best bet is to short sale because then there is no question about the bank releasing you. The bigger question, though, would be how the IRS would look at it because the money you borrowed did not necessarily “improve” the property. You should ask an accountant that question.

January 17, 2013 at 1:00 pm
(136) Al W B says:

Thanks, good point. Sounds like you’re calling it a “re-borrow”. If it FORECLOSES, could WF reasonably argue that the note is recourse because it was once paid down? Of course they can litigate. Do you yourself think the loan is still non-recourse as it is secured by the original note and trust deed? 580b is pretty specific. I can’t find anything addressing this nuance. I read about one bank arguing that a loan was recourse because it was called a HELOC (which mine is “called”), but court ruled that the loan was non-recourse because it was purchase money.

January 17, 2013 at 1:18 pm
(137) Elizabeth Weintraub says:

My personal opinion, which is worth jack squat, is it’s recourse because the money was not used to buy the home. But like I mentioned, the bigger question is will you be taxed on it, regardless of whether it’s a short sale or a foreclosure.

January 21, 2013 at 2:07 am
(138) Joseph says:

Hi. I short-sold my condo in CA, which was a purchase money loan with the 1st and 2nd both coming from a credit union. They only agreed to approve the short sale if I gave them $5k up front and signed a promissory note for 10k more over 5 years. I didn’t want to because the promissory note made absolutely no mention of the mortgage situation, but my girlfriend talked me in to. (I believe I could find emails where they stated that it was a condition of the sale approval, or perhaps my agents could be subpeoned?)

My sale closed in late 2010 (October I believe).

Do you think I have recourse to stop paying and sue they for what I already paid ?

Thanks !

January 21, 2013 at 10:48 am
(139) ELIZABETH WEINTRAUB says:

Are you asking me, a person who is not a lawyer, whether you have a legal right to stop paying on a debt that you re-affirmed and promised to pay? You would have to ask a lawyer that question, but she might charge you for the answer. I can tell you that SB 458 is not retroactive.

January 23, 2013 at 3:04 pm
(140) Al W B says:

After 6 months B of A says NO to modification but says I’m “approved” to participate in a short sale. They send me an “agreement to proceed”. On the phone and in prior letters, they actually quote a relocation compensation amount of $12,052 (how exact is that!) but the “agreement” states a range of $5,000 – $40,000, of course with several vague stipulations. I’m told on the phone that I’m not bound and can cancel at any time. I ask “can B of A cancel at anytime?” and “what exactly are we agreeing to?” and the lady says “I’m not an attorney but I don’t want you to miss out on this chance”.

Does anybody get a binding agreement from a bank before entering a short sale and how does one obtain such an agreement? Or do we just go on faith that “something better than worse” will happen? Do attorneys routinely extract a binding agreement out of them, prior to entering the sort sale process?

Do pigs fly? . . . ;-)

January 23, 2013 at 4:39 pm
(141) Elizabeth Weintraub says:

Yes, pigs fly all over those Bank of America Cooperative Short Sales coupled with the HIN Incentive, which is what I believe the bank is telling you. You can believe it. You’re golden. You’re preapproved. This is your lucky day!!

Here is a link about the Cooperative Short Sale Program:
http://homebuying.about.com/od/shortsale/qt/How-To-Apply-For-A-Bank-Of-America-Cooperative-Short-Sale.htm

And here is a link about the HIN Incentive:
http://homebuying.about.com/od/shortsale/f/Does-My-Short-Sale-Qualify-For-The-Hin-Incentive-At-Bank-Of-America.htm

It sounds to me like the bank is combining those two programs, which is a once in a lifetime opportunity with a short-lived window. I’ve had many clients close on this combination. If you want to move forward, find yourself an experienced short sale agent and ask them to open your file in Equator. I know it’s hard for you to believe that this is real, but it is real.

February 19, 2013 at 9:53 pm
(142) Jon says:

I put an offer in on a house that was described as a short sale. About a week later we were told it was actually in loan modification and was going to have to be cleared by that department before being submitted to the short sale dept at BofA.

Just got a call from our realtor today that the sellers now have a cash offer for $37k more than our offer and want to accept that offer and avoid the short sale. We have not yet received anything in writing.

My question is when is a short sale a short sale? When we signed the offer with the short sale addendum, when the bank agrees? Does my offer carry any weight if it never really was a short sale? Do I still have first refusal or have I even lost that?

February 19, 2013 at 9:59 pm
(143) Elizabeth Weintraub says:

You should seek a legal opinion on your rights because I am not allowed to give you legal advice. But I can tell you that a court would be hard-pressed to force a seller to sell as a short sale. If the seller were my client, I would suggest he give first right of refusal to the buyers who wrote the short sale offer to see if they (meaning YOU) would like to increase their offer to match the second offer. If you live in California, there is a part of the short sale addendum, Section 6, which allows the seller to send other offers to the bank. It is conceivable a seller could send an offer that takes the home out of short sale territory to the bank to approve, even though that offer is not a short sale offer. And the bank would take it and not approve yours, and then you’re out of luck anyway.

February 19, 2013 at 10:28 pm
(144) Jon says:

Thanks for the comments Elizabeth.

I will probably seek some legal advice to be safe. The part I am trying to find out is if the bank ever even got the short sale application and/or rejected it, or if the seller just got a better offer that was enough they don’t have to submit it as a short sale. This is why I was wondering if my offer with the short sale addendum “made” it short sale. I am in CA and I read section 6 as allowing the seller to accept backup offers and I guess they would only present them to the lender as part of avoiding a short sale, rather than getting the lenders approval for a short sale.

Apparently the sellers were only a couple of payments behind and had already acquired another home, and the bank had not approved a loan modification or or even received the application short sale yet.

My suspicious side wonders if they went the short sale route with their agent, but had not really explored it with the bank. Now that they accepted my lower offer (which was over their listing price at that point because they said they had another offer) that they are realizing the can get more money out of the property.

Coincidentally just this past weekend the listing on Trulia went from pending at $319k to for sale for $359k.

February 20, 2013 at 9:34 am
(145) Elizabeth Weintraub says:

See, there’s part of the problem — you’re looking on Trulia. Don’t look on Trulia for correct status or homes for sale. Check an agent’s website.

February 20, 2013 at 11:18 am
(146) Jon says:

Trulia part of the problem? Not sure I follow. Just pointing out that sometime over the weekend the changes were made to Trulia, then suddenly yesterday we find out the sellers have an offer for $37k more that our agent was describing as accepted despite our signed offer.

During our search we have used Trulia, Zillow, Realtor.com as well as several agents and their MLS sites as our search has about 6 different towns and covering about 250 miles, and they have been great for getting the lay of the land, and finding listing and local agents.

Trulia, ZIllow, Realtor.com are tools, nothing more, they have their good points and weaknesses, and really nothing to do with my situation. I just mentioned it because when the house price and status changed over the weekend we got an email alert and contacted our agent and were told it was nothing to worry about, then yesterday we find out the sellers have “accepted” a higher offer as described above despite our current contract, and was basically encouraging us to start looking again.

The basic question is whether if a seller and both agent’s involved write a contract with a short sale addendum and as far as I know so far never actually submit the deal to the bank as a short sale , then the seller receives an offer large enough to avoid a short sale, that our apparently our contract is no longer the primary contract and we should move on.

I am waiting for any sort of paperwork on this, but initially our agent very much made it sound like the other deal was gone and we should move on without even approaching us with the idea of countering, etc.

I don’t think I have been part of the “problem”, I made a verbal offer for the listing price, then the written offer that was accepted for $3k over the listed price at that time, then settled in for the wait.

February 20, 2013 at 12:55 pm
(147) Jon says:

This line “sound like the other deal was gone” was meant to say “sound like the other deal was done”.

February 20, 2013 at 3:23 pm
(148) Elizabeth Weintraub says:

The information you find on Trulia is often incorrect and outdated so you cannot rely on it. If you want current information, you need to get it from an agent’s website that draws from the mother ship, which is MLS.

In many parts of the country, homes that were once in “short sale territory” are no longer short sales and sellers are discovering they can sell instead as an equity sale — all short sales are contingent on being a short sale — if they are not a short sale, then they are not a short sale. Generally, a seller cannot enter into a contract to sell a home and then enter into a second contract without cancellation of the existing contract.

February 20, 2013 at 6:54 pm
(149) Jon says:

Just a comment about how this looks like it may be playing out. The realtors involved have pretty much acknowledged that the house should have been further along the short sale process with the bank before being presented as a short sale.

Because the sellers can’t afford to pay off their loan at the price agreed to on the contract we are looking at using an addendum to remove the short sale stipulation and increase the offer amount. In return I am asking the seller to include some farm equipment that we were previously purchasing separately contingent up sale of the home.

Everyone ended up agreeing that my offer was the primary offer, and that if I had dug in my heels I probably could have forced the seller to at least submit the deal to the bank for short sale approval or denial.

For me what was an almost too good to be true deal is back to a really good deal, but I can live with that. At a high level we basically split the difference. The deal is not done, but I feel like we are back on a believable path.

February 20, 2013 at 6:59 pm
(150) Elizabeth Weintraub says:

I am happy to hear that resolution is close at hand. Congratulations!!! I hope it works out for you.

October 22, 2013 at 1:53 pm
(151) IOW says:

We purchased our home in 2005 in CA with an 80/20 loan. The first is now with Nationstar and 2nd with WF. We decided to go with a short sale due to my spouse losing their job and we were severely underwater. Our house was just sold as a bank approved short sale on auctions.com(required by Nationstar) and we signed the escrow paperwork last week. We purchased the house for $370k and it sold for $185k plus the fee the website charges. What am I supposed to be receiving from both lenders to show me that the short sale is completed? Should I be looking to make sure that there is language specific to show that they will not come after us to pay later on or should I rely that SB458 will covers us.

My concern is more with the 2nd mortgage. They were harrassing me telling me they would send me to collections and now I haven’t heard a peep from them. I tried to access my account online and it stated that it was disabled so I can’t see anything regarding my second. Could they have sent me to collections already and how does that affect me or what are my rights if it was sent to collections already?

On the escrow paperwork it shows what the buyer and seller pay for closing cost. Is that “seller” items deducted from the total amount prior to distributing the final payment to the bank? Should I worry that they will require me to pay for those items?

October 22, 2013 at 2:00 pm
(152) Elizabeth Weintraub says:

Your agent is the person to answer those questions, and the legal questions need to be asked of a lawyer. If you have concerns, you should ask a lawyer to review your short sale approval letters, although, they are typically pretty straight forward.

It is also possible that Wells Fargo has released your second mortgage, as I’m seeing that happen in California. You might ask the title company to check to see if a reconveyance has been recorded. Otherwise, you will probably receive approval letters from both lenders.

You might also be concerned about taxation because California has not yet passed a mortgage debt relief bill.

I can tell you that sellers are to be at no expense as a condition of a short sale. Banks that approve a short sale must release a seller from liability, according to California Civil Code. But don’t take my word for it, talk to a lawyer.

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