California Approves Extension Anti-Deficiency Program for Homeowner’s Facing Foreclosure
By Sandy Flores
Instructor of real estate in the Santa Ana College
With a large opposition from banks, SB 1178 was passed to protect consumers. With a vote of 30 in favor and 4 votes against, it was possible to extend the protection antideficiency.
SB 1178 was introduced by Senator Corbett and the Association of California Realtors (CAR, for its acronym in English) was a sponsor of this legislation on consumer protection.
The Law SB 1178 extends the antideficiency protection for consumers who refinanced their original mortgage loans and face foreclosure. This extension of protection antideficiency were officially prohibits lenders go after the personal assets of borrowers who refinanced their mortgages and are facing foreclosure.
Before this law was passed in California, Section 580B of the Civil Procedure Code protected only to owners who have not refinanced their original mortgage. With the recent SB 1178, this protection also extends to those homeowners who refinanced their homes, thus correcting this inequity that existed before its approval.
What is the anti-deficiency protection?
The anti-deficiency protection are a number of limitations that banks have the time to pursue the owners legally on the difference of the loan obtained and the sale value of the property, if it is auctioned, even after losing the property, which in this case is the collateral for the loan.
Most home buyers do not know that when they get a mortgage to buy a property, this is known as a purchase money or purchase money because the loan is granted for the purchase of property.
When the homeowner gets a mortgage through a refinance, it ceases to be purchase money as the new loan was not granted for the purpose of buying property.
Do not confuse the SB 1178 as forgiveness of mortgage debt. SB 1178 is an extension to the existing antideficiency of protection for those homeowners who refinanced their properties or to lower the interest rate or to make improvements to their properties. Forgiveness of mortgage debt is trading is done through short sale or short sale or scripts in lieu of foreclosure, where the bank may consider your mortgage debt forgiveness.
Note that all banks look for ways to minimize your losses, avoiding foreclosure. Homeowners who are willing to sell their property through a short sale or deed in lieu of repossession, if they do not qualify for a loan modification, have better opportunities for banks to consider forgiveness of mortgage debt . However this decision is at the sole discretion of the banks.
It is important to know that letting a property is lost through foreclosure action does not mean that banks could take complete with the repossession of property. If the owner is not covered under the antideficiency protections that prohibit banks collecting deficiency debt, banks do have the right to take legal action against the owners to recover the balance owed even after losing the property .
Remember that as it is always advisable to investigate and ask and consider the advice of a professional to provide all necessary access to the information needed in case you are facing foreclosure.