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.
Background
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
http://HAFAShortSaleConsultant.com/
For More Information on this bill,
Please contact DeAnn Kerr at deannk@car.org.
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Visit the web address below to tell your friends about this.
http://takeaction.realtoractioncenter.com/join-forward.html?domain=carealtors&r=d1AAIe4aXD51
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.
dennis@SanDiegoHomes4u.com
760-436-0087, or cell at 760-212-8225
http://www.sandiegohomes4u.com/home.htm
See my Short Sale and Foreclosure Avoidance Web Site at
http://HAFAShortSaleConsultant.com/
for more information & free reports.
My Market Trends Report with graphs and charts for North Coastal San Diego will give you the Sales Statistics for the month and compare it with last year, by city!
http://www.sandiegohomes4u.com/RealEstateTrends.htm
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