What is SB-931?

Senate Bill 931 is now a California Law which went into effect on January 1, 2011.Itprohibits first purchase money lenders from obtaining a deficiency judgment against the borrower(s) after the lender approved a short sale and that short sale was consummated. This new law applies to first purchase money trust deeds encumbering one to four units of residential property.
It is unclear what the new law is with regard to refinancing. It seems to come down to the interpretation of the status of the loan (i.e., recourse loan), and at the head of all the confusion on this issue is one of the largest lenders that believes they have a legal right for a deficiency judgment on refinance short sales.

While SB 931 may not have gone far enough on this particular point, the verbiage however is clear that lenders can seek damages for fraud or waste by the borrower(s).

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