Short Sale Deficiencies Fact #14

On July 15, 2011, the California legislature enacted a new law expanding the protection for a homeowner against personal liability after a short sale. A mortgage lender is generally prohibited from pursuing a deficiency or deficiency judgement for a short sale involving a one-to-four residential unit property.

Exceptions to this rule include the following:

  • Lender seeking damages for fraud or waste;
  • the borrower is a corporation, LLC, or limited partnerships;
  • Cross-collateralized loan (special rules apply);
  • Borrower is a political subdivision of the state;
  • Bond line; or
  • Public utility lien.