Tuesday, May 18, 2010

Support bill SB 1178 to to extend CA anti-deficiency judgments

Please support the proposed bill to to extend CA anti-deficiency judgments to owners who did non-cashout refi's.

When is Enough, Enough?
The Big Banks are Opposing C.A.R.'s Bill to Protect Borrowers

C.A.R. is sponsoring SB 1178 (Corbett) to extend anti-deficienc
protections to homeowners who have refinanced "purchase money"

loans and are now facing foreclosure. Most homeowners didn't

even know that when they refinanced they lost their legal

protections, and now may be personally liable for the difference

between the value of the foreclosed property and the amount owed

to the lender. SB 1178 will be voted on soon by the entire Senate.

One can't help but think, "when is enough, enough?" Banks have

already foreclosed upon a family's home and now lenders can

continue to hound them for additional payment. How much more

money can today's families afford to pay when they've already

lost their homes and most likely their jobs? Are they never to

have the opportunity to begin again?

Action Item
Call Senator Mark Wyland  Today!
Urge your senator to vote "Yes" on SB 1178.
Call 1-800-672-3135 and enter your PIN number --182001622
Please ask your clients and others to call as well.
They can use the same PIN number.


California has protected borrowers from so called "deficiency"

liability on their home mortgages since the 1930s, but the

evolution of mortgage finance requires the statute to be updated.

Current law says that if a homeowner defaults on a mortgage used

to purchase his or her home, the homeowner's liability on the

mortgage is limited to the property itself. The law has worked

well since the 1930s to protect borrowers, ensure the quality of

loan underwriting and allow borrowers who are brought down by

financial crisis to get back on their feet.

Unfortunately, the 1930s law does not extend the protection for

purchase money mortgages to loans that re-finance the original

purchase debt -- even if the re-finance was only to gain a lower

interest rate. Recent years of low interest rates have induced

tens of thousands of homeowners to re-finance their mortgages,

yet almost no one realized that by re-financing their mortgages

to obtain a lower rate, they were forfeiting their protections.

These borrowers became personally liable for the balance of the loan.

C.A.R. is Sponsoring SB 1178 Because:

SB 1178 is fair. Home buyers, and lenders, entered into the

purchase with the idea that the mortgage would be non-recourse

debt, and that the lender would look to the security (the house)

itself to make good on the debt if the borrower cannot. It meets

the legitimate expectation of the borrowers, who have no idea

that they are losing this protection by a re-finance. Homeowners

didn't know that their re-finance exposed them to personal

liability, and new tax liability, on the note. It would be

unfair to allow a lender, or someone that has purchased a note

from a lender, to pursue the borrower beyond the value of the

agreed upon security.

SB 1178 is consistent with the intent of the orginal law and

simply updates it for modern times. Current law was intended to

ensure that if someone lost their home to foreclosure, they

wouldn't be liable for additional payment. Since the law was

passed over 70 years ago, homeowners re-financing from the

original loan to lower their interest rate has become

commonplace. The 1930s legislature didn't anticipate how

mortgages would change over time.

Lenders could pursue families to collect this "deficiency" debt

years down the road. Under current law, lenders have up ten

years to collect on the additional debt after a judgment has

been entered on the foreclosure. Years after a family has lost

their home, they could find themselves in even more financial

trouble. Lenders could even sell these accounts to aggressive

collection agencies or even bundle them into securities. The end

result would be banks who didn't lend responsibly in the first

place coming after families for even more money that they don't have.

SB 1178 does NOT apply to "cash-out" re-finances, unless the money was used to improve the home and it doesn't apply to HELOCs.

To get more information of Foreclosures, Short Sales, Deficiency Judgements and their concequences, see my
Foreclosure Avoidance & Information web site at

For More Information on this bill,
Please contact DeAnn Kerr at deannk@car.org.
Visit the web address below to tell your friends about this.


Dennis Smith, ABR, SRES, e-PRO, CDPE, Realtor® DRE# 00476662
Certified Distressed Property Expert
Donna "Sunshine" Smith, SFR, Realtor® DRE# 01249837
Short Sale, Foreclosure Resource Certified
RE/MAX By-the-Sea
Formerly with Taylor Place Real Estate
Buy or Sell a Home with Me, Use my Moving Truck - F R E E for life.
760-436-0087, or cell at 760-212-8225

See my Short Sale and Foreclosure Avoidance Web Site at
for more information & free reports.

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