summary
Introduced
In Committee
Crossed Over
Passed
Dead
Signed/Enacted/Adopted
07/11/2011
07/11/2011
Introduced Session
2011-2012 Regular Session
Bill Summary
SB 458, Corbett. Mortgages: deficiency judgments. Existing law prohibits a deficiency judgment under a note secured by a first deed of trust or first mortgage for a dwelling of not more than 4 units in any case in which the trustor or mortgagor sells the dwelling for less than the remaining amount of the indebtedness due at the time of sale with the written consent of the holder of the first deed of trust or first mortgage. Existing law provides that written consent of the holder of the first deed of trust or first mortgage to that sale shall obligate that holder to accept the sale proceeds as full payment and to fully discharge the remaining amount of the indebtedness on the first deed of trust or first mortgage. Existing law specifies that those provisions would not limit the ability of the holder of the first deed of trust or first mortgage to seek damages and use existing rights and remedies against the trustor or mortgagor or any 3rd party for fraud or waste if the trustor or mortgagor commits either fraud with respect to the sale of, or waste with respect to, the real property that secures that deed of trust or mortgage. Existing law makes these provisions inapplicable if the trustor or mortgagor is a corporation or political subdivision of the state. This bill would expand those provisions to prohibit a deficiency judgment upon a note secured solely by a deed of trust or mortgage for a dwelling of not more than 4 units in any case in which the trustor or mortgagor sells the dwelling for a sale price less than the remaining amount of the indebtedness outstanding at the time of sale, in accordance with the written consent of the holder of the deed of trust or mortgage if the title has been voluntarily transferred to a buyer by grant deed or by other document that has been recorded and the proceeds of the sale are tendered as agreed. The bill would also provide that, in other circumstances, when the note is not secured solely by a deed of trust or mortgage for a dwelling of not more than 4 units, no judgment shall be rendered for any deficiency upon a note secured by a deed of trust or mortgage for a dwelling of not more than 4 units, if the trustor or mortgagor sells the dwelling for a sale price less than the remaining amount of the indebtedness, in accordance with the written consent of the holder of the deed of trust or mortgage. The bill would provide, following the sale, in accordance with the written consent, the voluntary transfer of title to a buyer, as specified, and the tender of the sale proceeds, the rights, remedies, and obligations of any holder, beneficiary, mortgagee, trustor, mortgagor, obligor, obligee, or guarantor of the note, deed of trust, or mortgage, and with respect to any other property that secures the note, shall be treated and determined as if the dwelling had been sold through foreclosure under a power of sale, as specified. The bill would prohibit the holder of a note from requiring the trustor, mortgagor, or maker of the note to pay any additional compensation, aside from the proceeds of the sale, in exchange for the written consent to the sale. The bill would provide that these provisions are inapplicable if the trustor or mortgagor is a corporation, limited liability company, limited partnership, or political subdivision of the state. The provisions would also be inapplicable to any deed of trust, mortgage, or other lien given to secure the payment of bonds or other evidence of indebtedness authorized, or permitted to be issued, by the Commissioner of Corporations, or that is made by a public utility subject to the Public Utilities Act. The bill would provide that any purported waiver of these provisions shall be void and against public policy. This bill would declare that it is to take effect immediately as an urgency statute.
AI Summary
This bill expands protections against deficiency judgments, which are legal actions to recover the difference between the amount owed on a loan and the sale price of the property when the sale price is less than the debt. Specifically, it prohibits deficiency judgments when a borrower sells a dwelling of four units or fewer for less than the outstanding loan balance, provided the sale is with the lender's written consent, the title is voluntarily transferred and recorded, and the sale proceeds are accepted as agreed. This protection now applies even if the loan is not solely secured by the dwelling. The bill clarifies that after such a sale, the parties' rights and obligations are treated as if the property had been foreclosed through a power of sale. It also prevents lenders from demanding additional compensation beyond the sale proceeds for their consent and states that any attempt to waive these protections is void. These provisions do not apply to corporations, limited liability companies, limited partnerships, political subdivisions, or certain bonds and public utility loans, and the bill takes effect immediately as an urgency statute to address the ongoing foreclosure crisis and encourage short sales.
Committee Categories
Justice
Sponsors (5)
Last Action
Chaptered by Secretary of State. Chapter 82, Statutes of 2011. (on 07/15/2011)
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