Antideficiency protection extended to second trust deed discounts
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About The Author
Giang Hoang-Burdette
is a licensed real estate agent and the first tuesday Journal Online editor. She is also lead editor for the Forming Real Estate Syndicates, Buying Homes in Foreclosure, Legal Aspects of Real Estate and Tax Benefits of Ownership books.
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Assignee barred from collecting on junior lien default after non-judicial foreclosure sale
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The votes are in: extend the Mortgage Forgiveness Debt Relief Act
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Three trust deeds, same property, same 8:00 AM recording, and separately indexed share same priority
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HOA’s unrecorded judgment against condo owner is second and junior to later refinancing
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Trust deed beneficiary of record needs no authority to foreclose
So just to fully understand the new and the old “recourse and non-recourse” as it applies to 1-4 units. Let’s say a homeowner has owned the home for several years and borrows and secures the loan with a 2nd lien and the money was used for autos and vacations. The first lender forecloses wipes out the 2nd and the homeowner is not subject to a deficiency?
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The item about small claims ceiling being raised to $10,000 isn’t quite complete. The higher amount applies only to “natural persons.” If the landlord is a business (a DBA, partnership, LLC, etc.), then small claims court jurisdiction is limited to $5,000. The analysis of SB 221 explains: ” The policy behind keeping a lower threshold for businesses is to protect consumers who may become defendants. Because the action is brought in small claims court, those consumers will not have access to an attorney. There is a greater likelihood that businesses will have access to more resources and may potentially have access to outside legal services. This defeats the purpose of small claims court and could result in a consumer potentially being held to pay a significant amount of money without the aid of an attorney and with very little recourse.” These days, most landlords operate as businesses, not in their own personal names.
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Sb458 was “suppose” to help sellers. Originally, I felt it would hurt the seller because if forces the lender to accept the short sale amount as payment in full…..but in speaking to the major lender some of the processors do not even know about the new law! The other day I hear there is even a newer law, something about the junior lien holders HAVE to accept the outline of the first TD short sale approval. Do you have any info on this?
Thanks
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Sharon: Thanks for posing the question. Real estate and mortgage law enacted during the 2011-2012 California legislative session includes no new law which alters the effects of S.B. 458. The “newer law” you heard from those lenders may have been in reference to S.B. 412, which has been sitting with the Senate since April 2011 and was most likely replaced by S.B. 458. [Calif. Code of Civil Procedure §580e]
People in Sacramento gossip circles will stir up talk on these bills but when they turn dead – like S.B. 412 most likely will when the session ends – the conversation on the bills are thrown out the window abruptly.
Currently, state law does not provide antideficiency protection for second trust deeds notes (other than purchase-assist loans and carrybacks on one-to-four residential units) unless the second trust deed lender consents in writing to a short payoff on a sale of a one-to-four unit residential property. [For more information about antideficiency laws in California, see Chapter 43 “Antideficiency: past, present and future” in the first tuesday book, Real Estate Finance.]
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What about foreclosures? Does the second holder come after you? or does the the antideficiency protection for second trust deeds apply?
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