THE NEW LAW....

Thought you might find this of interest--there is so much to learn and so much to know about  today's market.  There is a very important article on this morning's Union Tribune Business Section's front page.  In summary, "A new California law will further protect homeowners pursuing short sales by barring first and secondary lien holders from going after sellers for money owned after the short sales close."  . . . "As the economic recession continues to impact Californians, (Bill) 458 will allow homeowners forced to sell at a loss to have closure at the end of the process," Corbett said in a statement to the Union Tribune.  "By extending anti-deficiency protection to all loans on a home when a short sale occurs, a homeowner can use a short sale as an alternative to foreclosure or bankruptcy".   "The new law, which became effective immediately, now prohibits secondary lien holders from pursuing deficiency judgments after a short sale closes.  That means banks can't come after sellers for what they owe on loans and could not pay back in the sale of the property. "
THIS IS GREAT NEWS!  

Regards,

Andrea Dougherty ~ The Andrea Dougherty Group

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October 21 2011 - Rancho Santa Fe
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Profile picture for soptest
This is BAD news!
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October 21 2011
Profile picture for sunnyview
It's good news for agents and it is bad news for banks. Owners will be happy to walk away with less risk and only a 2-3 year delay in buying their next house.
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October 21 2011
That law went into effect on 7/1/2011.
http://foreclosurenv.wordpress.com/2011/07/18/california-senate-bill-458-ca-sb-458/

Happy funding, Rudi
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October 21 2011
Profile picture for the_country_hick
I would go so far as to question the actual legality of this law.

It is nothing more then changing a contract after it has been made. That has always been illegal to do. A new law can only change future contracts not old ones already in effect. This will stop all future second mortgages from being made if it is held up.
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October 21 2011
Are they also stopped from getting a deficiency in foreclosure?  If not, why would any lender approve a short sale?  I'm not from CA so I don't know, but if you did that here in IL, there probably wouldn't be too many short sales and a lot more foreclosures.
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October 21 2011
Profile picture for Pasadenan
I agree with Steve - it just will mean that if there is a second lien, you won't get approved for a short sale by the lenders, unless the first lien holder takes a larger loss and passes on some of the sale revenue to the second lien holder.

It is not good for the owners nor the agents; only the first lien holder.
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October 22 2011
Profile picture for shasta_steve
I've said this before about this law it is really just smoke and mirrors.  It is just another law that agents can misrepresent, when in reality it means almost nothing.  As pointed out before it really changes nothing about the original contract because the second can simply refuse to allow a short sale.   It will not force the second to take a loss or allow a short sale. 

In California, what often times happens, is the first will agree to give the second a certain amount of money so they will allow the short sale.  The second also had the option of having the homeowner sign a note promising to pay a certain amount of money so the short sale could go through.  It looks like that option is over now.  This law will do nothing to help short sales go through.  It only makes it clearer what will happen after the short sale.  My guess is the intent of the law was to stop lenders from seeking payment after a short sale, when often times they may not have been allowed to if the house would have just foreclosed. 
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October 22 2011
Profile picture for sunnyview
Thumb for the great link Rudi!
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October 23 2011
Great news for sellers in terms of having closure. There is however a downside to those sellers.

In a short sale review if the bank feels they can close it and recoup 5% more later, they may be more apt to agree to short sell. If the numbers are final they may not agree to sell, and force foreclosure if they are needing more dollars to settle the file. This could ultimately leave more sellers without short sale approvals.

In the end the banks will ultimately control the fate.
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June 12 2012
Profile picture for Pasadenan
The law went into affect over 11 months ago!!!!!

How could "old news" possibly be considered "great news"?  It is not even "news".  It is just the obvious "status quo".

As already mentioned in several of the posts last year, it changed nothing.  It was just legislative smoke and mirrors.
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June 12 2012
 
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THE NEW LAW....
Profile picture for Pasadenan
Latest reply by Pasadenan
June 12 2012 | 10 answers
  • Posted by Andrea Dougherty
  • In Home Buying
  • October 21 2011
Mortgage Rates
 
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