Earlier this year, the California legislature extended short-sale anti-deficiency restriction to all lienholders who approve short sales. What does this mean? It means that if any lender approves a short sale, they are prohibited from coming after the borrower later for a deficiency.
If the lender on a first mortgage approves a short sale, then it CANNOT proceed against you later for a deficiency between the value of the property and the loan balance. Ever. This is not instead of CCP §580b (purchase money deficiency prohibition), or CCP §580d (non-judicial foreclosure deficiency prohibition), it is just another mechanism for accomplishing the same result, albeit under different circumstances. Because §580b already applies to purchase money loans, this new statute will apply only to refinance loans. It does NOT apply to junior liens.
Marin and San Francisco bankruptcy attorney on: Letting a home go by short sale may enable a borrower to re-qualify to buy a new home sooner than would likely be the case in the event of a bankruptcy or foreclosure.
