Politicians finally get one right
August, 2011 – On July 15 2011, Governor Brown signed into law SB 458 (Corbett). SB 458 extends the anti-deficiency protections of SB 931 (2010), which covered first mortgages in California, to all mortgage loans.
From the text of the bill - "This act is an urgency statute necessary for the immediate preservation of the public peace, health, or safety within the meaning of Article IV of the Constitution and shall go into immediate effect. The facts constituting the necessity are: In order to mitigate the impact of the ongoing foreclosure crisis and to encourage the approval of short sales as an alternative to foreclosure, it is necessary that this act take effect immediately."
For the full text of the bill, please see http://www.leginfo.ca.gov/pub/11-12/bill/sen/sb_0451-0500/sb_458_bill_20110715_chaptered.html
What this means for distressed homeowners in California who are unable to keep their homes and who choose to dispose of the burden via a Short Sale, is that not only are they protected from a deficiency judgment in favor of the holder of their fist mortgage, but also for all junior liens secured by a deed of trust or a mortgage for a dwelling of not more than 4 units. There are exceptions where the property owner is a corporate entity or a political subdivision of the state.
Until the enactment of SB 931 & 458, it was possible for a lender to approve a short sale and still pursue the former property owner for the unpaid balance of the loan by seeking a deficiency judgment. Adding insult to injury, this process could saddle already financially distressed people with an additional debt that would follow them for years.
Recognizing that in order to speed the recovery of the housing market, as well as amend a legal structure that favored financial institutions over and above the citizens of California, first Governor Schwarzenegger and then Governor Brown have signed these important bills into law on an urgency basis. These simple laws are a sign that at least some of our elected leaders are taking the current imbalance of legal protections that favor corporate interests over the rights of the people seriously.
No matter what we see in Washington DC, where the unending hubris of our elected leaders in taking direction from the donations of corporate lobbyists, rather than the will of the voters, has brought our once great country to its financial knees, it’s refreshing to see that some people in power use it constructively in these critical times.
It has often been said that as California goes, so goes the nation. While some examples of this leadership have clearly led to undesirable results for society and economy, these two pieces of legislation have the potential to tip the playing field back in favor of the people. If California is to lead us out of this mess, as it has arguably led us into it, we’ll need more of this kind of conscious action. While we are not always able to cheer our politicians on, a guarded round of applause for Arnie and Jerry appears to be in order.Paul@PaulSieving.com or (530) 274-0906. www.PaulSieving.com
Paul Sieving is a Realtor® with Good & Company Realty, a former Director and MLS Chair of NCAOR, was Board Chair of the Grass Valley Chamber of Commerce in 2004, and has served our community as a real estate professional for 12 years. Comments, questions and thoughts are welcome at
