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.