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Law Offers New Protection to Short Sale Homeowners
By Barbara Pronin, RISMedia Columnist
A new law signed recently by California Governor Jerry Brown offers extended protection to state homeowners who are forced to short sell their homes.
SB 458 ensures that any lender who agrees to a short sale must accept the agreed-upon short sale payment as payment in full on the outstanding balance of all loans, including second mortgages.
The previous law, SB 931, enacted in 2010, held that a first mortgage holder must accept the agreed-upon short sale amount as full payment, but the law did not extend to junior lien holders.
“The signing of this bill is a victory for California homeowners who have been forced to short sell their home only to find that the lender could pursue them after the short sale closes, and demand additional payment to subsidize the difference,” says California Association of REALTORS® President Beth L. Peerce. “The new law brings closure and certainty to the short sale process and ensures that once a lender has agreed to accept a short sale payment on a property, all lienholders—those in first position as well as in junior positions – must consider the outstanding balance as paid in full, and the homeowner will not be held responsible for any additional payments on the property.”
An urgency clause in the new law makes SB 458 effective immediately upon signing.