Catherine Myers and I have closed many short sales together. We teamed up about 3 yrs ago. Even though we still do individually we still work together on many and use each other as a sounding board to get thru those escrows that defy sanity.......I am very fortunate to have met and teamed up with a like minded professional....


While this bill presents as a relief to many borrowers it has also been suggested that the banks may balk against short sales.......Their incentive to do short sales may be taken away.......if they have to give up their rights to collect deficiency judgment.


It will remain to be seen what exactly will happen...............


THIS also brings up a major point as to whether we should stall short sales closings until after the first of the year....will our sellers be better protected? Many of the banks will remove the verbiage to come after deficiency if it is the original purchase loan...BofA has been fairly consistent in keeping the verbiage in.


The attorney who spoke at legal update I attended last week  stated about 75 or 78% of the short sale letters she has reviewed has some type of hidden or open verbiage in re: to future deficiency.


Again we are encouraging our clients to seek legal counsel in re: to this newly signed bill.


One of the major issues we are starting to see happen.........those homeowners who either knowingly or unknowingly committed fraud at the onset of their loan application and by proceeding with short sale opens them up to audits.......the banks are starting to prosecute...I mentioned on a recent discussion a legal update I attended this past week had a homeowner whose short sale was approved but prior to closing it was discovered fraud was involved in the loan origination and the short sale was rescinded and the bank is going after the borrower for fraud.....


It was a non recourse loan and had they chose to foreclose instead of short sale the foreclosure would have protected them from prosecution...


So this could become very interesting in the future.........the banks may not balk and it may work out fine......but since so many california attorneys are concerned  and have varying opinions it begs the right to be mentioned and watched.



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I think like anything else we will have to see how lenders react after January 1st. They may not follow the law on their own--it may have to be brought up by the agent like the non-recourse on purchase money loans that lenders don't always "realize".
Without reading it, I'm assuming the bill insists lenders must forgive the deficiency balance in short sale transactions. I think it is a great idea, as the "threat" of deficiencies causes more harm than good. It will aid in streamlining short sales, and their will be less "uncertainty" when it comes to them. If a homeowner has the assets to cover the deficiency and it is a recourse loan, the lenders can still of course opt for foreclosure and go after a deficiency judgment.

This is actually right on time, as liquidating an REO asset has now become even more of a task and financial drain on lenders with the recent legal challenges the "robo signers" have caused.

Besides, these deficiencies rarely get collected on anyway, at least, only pennies on the dollar.

Lets hope it doesn't sway the lenders in a negative way!
Hi, Yes it is forgiving the deficiency on first loans in short sale transactions. We are hoping it will prove to be a great bill of protection....
The fact that we have been told there has been a recent uptick in collecting deficiencies and the reported recent cancellation of a short sale when audit found improprieties is showing the powers to be are now paying more attention to the particulars of the loans at origination has been somewhat of a cause of concern.
Again this is where borrowers need to seek legal counsel before pursuing short sale and/or any action to ensure short sale is in their best interest.
Mike, in California they cannot go after deficiency on a first loan after trustee sale (foreclosure).


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