Friday, July 15th, 2011, Governor Jerry Brown signed into law Senate Bill 458. SB 458 provides the assurance that the agreed upon short sale payment is to be considered as full and final satisfaction of the debt, extended to include Junior lien holders (2nd, 3rd… etc).
Last year, Senate Bill 931 was passed which protected homeowners from 1st lien holders, but now SB458 extends this to cover 2nd and tiertiary lienholders.
This is such a relief for many individuals who have contemplated a short sale, but worried about the bank coming after them for the deficiency.
Number of MENIFEE Homes in Default
According to CORELOGIC (the tax portal Riverside Realtors can access for property tax information):
There are 524 properties in our area flagged as having an Auction Date set to occur within the next 21 days in these zip codes:
There are 384 properties currently flagged as “pre-foreclosure” (Notice of Default filed)
I had never before seen so many more Auction dates than Pre-foreclosures. We are also seeing an escalation of foreclosure activity by the banks recently, so if you are in this situation (or you know someone who is) be sure to contact a Realtor who is experienced with the foreclosure and short sale process to see what options are available to you. (Note: even if you have an Auction Date, it may not be too late to try to get a short sale submitted, and the Trustee Sale date postponed)
SHORT SALE FEARS
Although people are striving to become better informed about this process, there is still a lot of misinformation going around about short sales and foreclosures.
For example, the two biggest fears I see people having regarding short sales are still: paying taxes on a bank issued 1099, and the bank coming after them for the difference between what they owe and price the house will sell for.
1. Receiving a 1099 and paying additional taxes to State and Federal
The paying of additional Federal taxes (1099 for the loan deficiency) went away* with The Mortgage Forgiveness Debt Relief Act of 2007, and is set to remain in effect until 12/31/12
The paying of additional State taxes (1099 for the loan deficiency) went away* when California conformed to the Act on 4/12/2010 through Senate Bill 401
2. That the bank that the bank will come after them for the loan deficiency
Obtaining a full and final satisfaction of the trust deed should always be part of the short sale negotiation with the lender.
However, effective 1/1/2011, the concern about a deficiency judgment after a short sale on a 1sttrust deed, went away** with SB 931 going into effect
AND NOW, with the passing of SB 458 on 7/15/2011, the concern about a deficiency judgment after a short sale on a 2nd , 3rd, etc. Trust Deed just went away**
DON'T BURY YOUR HEAD IN THE SAND
It is pretty clear now that, for most people, if you can’t afford to hold onto your house, or obtain a successful loan mod, the ABSOLUTE BEST THING TO DO IS A SHORT SALE. And don't wait until it's too late!
Lenders are getting their act together, and we are seeing an escalation of foreclosure activity by the banks recently. If you are in this situation (or you know someone who is) NOW IS THE TIME to contact a Realtor who is experienced with the foreclosure and short sale process to see what options are available to you. (Note: even if you have an Auction Date, it may not be too late to try to get a short sale submitted, and the Trustee Sale date postponed)
"Distressed homeowners tend to just bury their heads in the sand" according to June DeMott, Assistant Vice President in the California Short Sale Department, who I met last week. She's right. I see this time and time again ... too many times, people waiting until the last minute and then scurrying around trying to do something about it at the last minute.
I confess. That's exactly what I did almost 3 years ago when I was losing my home that I had put almost $70,000 down on. I buried my head in the sand for several months before trying to get a loan mod (got denied), and trying to short sale (didn't work). I am thankful to be in great place right now, but I remember how hard it was going through all those different processes. It's not easy. But you need to try. You don't want to regret later that you didn't try a loan mod, or that you didn't try a short sale. It is good that the government has put laws like this in place to try to make it at least a little easier for a fresh start for those who try and succeed.
There IS a light at the end of the tunnel, but "y'all gotta git through that tunnel first"!
*Please check with your tax professional to make sure you qualify for this.
**There are a few stipulations to the SB 931 and SB 458 that you will want to review to make sure you qualify. For example, if you decide to get mad and tear up your house before you leave it, this is called “bad faith waste”, and there is no deficiency protection.
For links to these Senate Bills & Mortgage Debt Forgiveness Act go to our website: www.MenifeeShortSales.net