Recent Blog Posts

New Consumer Financial Protection Bureau takes over RESPA enforcement

Home Law Realty — Thu, 18 Aug 2011 18:01:00 GMT

Short sale fraud is everywhere. Real estate professionals must act within the restrictions of RESPA so as to protect their licenses. A new government agency will now oversee enforement of RESPA. For details on RESPA, contact attorney\broker J. Arthur Roberts

RESPA - Real Estate Settlement Procedures Act

Effective July 21, 2011, the Real Estate Settlement Procedures Act (RESPA) will be administered and enforced by the Consumer Financial Protection Bureau (CFPB).

If you are a consumer with a question or complaint related to your mortgage or mortgage servicer, please contact the CFPB’s Consumer Response team at 855-411-2372 (855-729-2372 TTY/TDD) or click here.

If you are a settlement service provider with questions about RESPA, please email the CFPB at CFPB_RESPAInquiries@cfpb.gov.

The Real Estate Settlement Procedures Act (RESPA) insures that consumers throughout the nation are provided with more helpful information about the cost of the mortgage settlement and protected from unnecessarily high settlement charges caused by certain abusive practices.

The most recent RESPA Rule makes obtaining mortgage financing clearer and, ultimately, cheaper for consumers. The new Rule includes a required, standardized Good Faith Estimate (GFE) to facilitate shopping among settlement service providers and to improve disclosure of settlement costs and interest rate related terms. The HUD-1 was improved to help consumers determine if their actual closing costs were within established tolerance requirements.

Highlights

	Settlement Agreement, Prospect Mortgage LLC
	Settlement Agreement (8 Jul 11), Fidelity National Financial, Inc.
	RESPA Roundup April 2011
	RESPA Roundup March 2011-Guidance for RESPA in relation to FRB compensation rule
	Home Buying Videos (HUD's You Tube Channel)
	Solicitation of Information on Changes in Warehouse Lending
	Exemption from RESPA for Certain Subordinate Loan Transactions
	Home Warranty Interpretive Rule: Response to Public Comments (11/23/2010)
	Home Warranty Interpretive Rule (6/25/2010)
	HUD's new settlement cost booklet
	New RESPA Rule FAQs (updated 4/2/2010)
	RESPA Final Rule (pdf version)
	RESPA Final Rule (Electronic Code of Federal Regulation version)
	RESPA Forms and Completion Instructions
	Regulatory Impact Analysis
	RESPA ANPR on "Required Use" Prohibition (6/3/2010)
	RESPA Roundup Archive

Consumers

RESPA is about closing costs and settlement procedures. RESPA requires that consumers receive disclosures at various times in the transaction and outlaws kickbacks that increase the cost of settlement services. RESPA is a HUD consumer protection statute designed to help homebuyers be better shoppers in the home buying process, and is enforced by HUD.

	More about RESPA
	FAQ's about Escrow Accounts
	Know Your Borrower's Rights
	Your Rights and the Responsibilities of the Mortgage Servicer
	Sample Complaint to Lender
	Property Tax Alert
	Private Mortgage Insurance (PMI) Act Information
	State and Local Consumer Agencies
	Other Federal Resources

Industry

	Statute
	Proposed Rules
	Statements of Policy
	Program Guidance
	Federal Register Notices
	Public Guidance Documents
	FAQ's for Industry
	Settlement Agreements
	Joint Report to Congress
	Legal Proceedings

Home Law Realty

Home Law Realty Agent — Fri, 12 Aug 2011 22:04:00 GMT

Home Law Realty is pleased to announce the launch of our new blog and RSS feed available here

Short sale Agents: Avoid getting sued!

Home Law Realty — Wed, 10 Aug 2011 18:25:00 GMT

The article below describes the seven mosy common reasons short sale agents are getting sued. At my law firm, we see this every day.

Brokers Foresee an Increasing Number of Lawsuits Related to Short
Sales

Almost 55 percent of survey respondents indicated that short sales were the basis of a
significant number of current disputes. Moreover, 76 percent of those who ranked this
issue placed it among the top three of their expected future issues. This was just one of the
significant findings reported in the recently-released 2011 Legal Scan: Legal Issues Facing
Real-Estate Professional, published by the National Association of Realtors® (NAR)

The Legal Scan was initiated by the Legal Affairs Department of NAR in 1996 and first came
out in 1997. Since then it has been updated every two years. "For the 2011 Scan, a survey
was e-mailed to 2055 selected individuals in the real estate industry ... ." Recipients of the
survey included selected (not random) agents, brokers, real estate attorneys, real estate
educators, and members of NAR's Risk Management Committee. There was a 19 percent
response rate to the survey.

Agency retained the top ranking among the groups of issues that caused disputes. Within
that general category, fully 83 percent of respondents placed dual agency among their top
three current issues. Typical of respondents' comments was this: "Licensees are not well-
enough schooled on what they can and cannot do as dual agents! They don't know well
enough what they can say, or must not say between the parties." Breach of Fiduciary Duty
also ranked high within the Agency category, with 71 percent indicating it was among their
top three issues. A typical respondent comment was "Too many agents forget who they
work for and the full bundle of responsibility we owe to the client."

Another traditionally high-ranking category of problem areas is Property Condition
Disclosure. This includes both physical and non-physical conditions, so short sales were
included here. Of the 55 percent of respondents who indicated that short sales were the
basis of a significant number of disputes, 76 percent placed them as among their top three.
With respect to the "traditional" problem of failing to disclose physical defects, it was noted
that short sale sellers tended to see no benefit in disclosing problems. Moreover, the typical
insistence on as-is sales in these situations "has resulted in a decline of quality of seller
disclosures."

Disclosure problems also arise from the failure to disclose that a property is, or is soon likely
to be, in a short sale situation. Additionally, problems arise in the short sale arena because,
as one respondent put it: “Too many agents are dabbling in short sales without training and
are not properly advising sellers of options and recommending legal counsel.” There seems
to be broad consensus that future lawsuits will be the result of such situations.

REO sales are also leading to problems. Nearly 60 percent of respondents indicated that
they believe that REO-related disputes will increase over the next two years, and 76
percent said they believe it will be among the top three issues they will face. Again, lack
of disclosure is the big problem; although with REOs that is more likely to be related to
physical than transactional issues. Survey respondents blame not just the banks, but also
REO listing brokers for frequently failing to disclose material defects of which they had
knowledge.

An interesting aspect of the survey results is that many participants indicated a strong need
for training in various areas, even though these may not have among the most frequent
causes of disputes. Primary among these were RESPA, Fair Housing, and Anti-trust.

The survey also queried about cases leading to damages. New York was the winner here,

reporting 11.39 percent of the total. Pennsylvania and California followed with 8.86 percent
and 8.23 percent respectively.

What categories of suits cost the most? The leading damages award was a Breach
of Fiduciary Duty and Fraud case. The award was $2,709,587. A Fair Housing (Race
Discrimination) case came in second with an award amount of $2,416,000.

Be careful out there.

Short Sales: 7 Legal Pitfalls

In many areas, short sales are the biggest game in town. But you don't want to jump into this
niche willy-nilly.
April 2009 | By Robert Freedman

In addition to educating yourself on the ins and outs of these complex deals, you also need a
good picture of the legal risks that exist for you.

1. Misrepresenting tax consequences.
Although it's true that the federal government passed a law in 2007 directing the IRS not to
count mortgage debt forgiven by a lender as income, the provision is limited. It applies only to
purchase money; it doesn't apply to debt on a cash-out refinancing, and it doesn't apply to second
homes. There's also a dollar limitation, albeit a generous one ($1 million for married couples
filing separately, twice that for joint filers). "A lot of associates are telling people there are no tax
consequences," says Lance Churchill, a short sales specialist and trainer who operates in Boise,
Idaho, and San Diego. "But it's a limited law and you just need to be accurate about it."

2. Misrepresenting how secondary debt is treated.
Practitioners might mistakenly tell sellers that all the house debt is forgiven once the primary
lender approves a short sale. But that might not be the case, Churchill says. Holders of second
deeds of trust don't typically forgive the debt. More commonly, they accept a partial payment,
like $2,000; and rather than write off the balance, they sell the balance to a collection agency for
another few thousand dollars. In many states, these second loans are recourse, so sellers can be
caught by surprise when the collection agency contacts them a year later seeking payment of the
debt.

3. Acting on inappropriate lender requests for seller contributions.
It's not uncommon for lenders to go after money that the sellers have in the bank or in a
retirement account before they approve a short sale request. They'll sometimes seek to put the
onus on the real estate practitioner to get sellers to sign over a note for the amount they have in
the bank as a condition of sale. But in states where mortgage debt is nonrecourse, lenders have
no right to the money, and associates that suggest otherwise to the sellers might be later sued for
negligence.

4. Breaching fiduciary duty.
Investors are increasingly executing what's known as a "double close and flip," a type of short-
sale transaction that can leave practitioners exposed to irate sellers who say they got a raw deal.
Here's what typically happens: Investors insist on handling short-sale negotiations with the
lender, freeing up their real estate practitioner to concentrate on finding a buyer. During the

negotiations, the investors — often without the practitioner's knowledge — talk the sellers into
turning over the deed. Once the practitioner finds a buyer, the investors do a double closing,
buying it themselves at a deep discount and then flipping it to the buyer at the listed price,
making money on the spread. "The seller might feel he got less than he would have had the
associate done his job and not handed over negotiations to the investor," says Churchill.

5. Providing poor oversight of a loss mitigation company.
Companies that specialize in managing short sales promise to focus on the complicated details of
the short sale, freeing up practitioners' time to find buyers. But if you take a hands-off approach,
you can be charged with negligence if a deal falls apart. "A lot of these companies are fly-by-
night or have one person who's overworked," Churchill says. "Practitioners are coming back a
month later to find no one's even opened the file."

6. Lacking the required license to undertake loss mitigation.
It often makes sense for practitioners to take a two-pronged approach with clients facing a
difficult time paying their mortgage — first trying to help them accomplish a loan modification
(for a fee), and then finding a buyer if a modification doesn't work. But watch out. Depending on
your state, you could need a specific license, sometimes called a credit repair license, to earn a
fee for helping owners modify mortgage terms. Without having the right credentials, taking a fee
for loan modification assistance could be a criminal offense.

7. Facilitating transactions not listed on the HUD-1 form.
It's not uncommon for investors to offer incentives to sellers to move a deal forward, but lenders
typically frown upon sellers who walk away with money when they're supposedly taking a loss.
Investors sometimes work around this limitation by offering to buy something from the sellers
at an attractive price, such as a couch for $5,000. Associates who communicate these offers to
sellers can get tied into charges of lender fraud because the deals may be deceptive.

by Bob Hunt

Study: Homeowners try to "work" the loan mod system..YA THINK?

Home Law Realty — Mon, 01 Aug 2011 20:40:00 GMT

Firm commentary: The article below discusses an academic study that verifies common sense: That people will change their behavior and manipulate the system to get a loan modification. This is not exactly a news flash as we we see have seen the full spectrum of this behavior since the crisis began in 2008.

The takeaway: the failure of the U.S. Senate to vote to amend the bankruptcy code and reinstate judicial cram down of residential mortgage loans opened the door for the extended crisis. We are talking about people's homes not just an investment. Therefore, you can expect people to behave desperately and do what they have to do to survive.

Had bankruptcy reform passed, there would have been no need for self interested loan servicers to be involved in the loan modification process. The process would have been standardized and implemented by the existing bankruptcy system. The bankruptcy court volume had dropped substantially since the 2005 reform act, not only did that institution have the tools and experience to handle the crisis, it had the excess capacity.

Unfortunately, the influence of the mortgage lobby prevented this solution from being implemented. 3 years later, our economy remains adrift. Read on...

http://www.dsnews.com/ articles/modifications-and- strategic-behavior- countrywide-case-study-2011-07-13

The promise of a loan modification based on delinquency status induces some financially proficient borrowers to intentionally fall behind on their mortgage payments, according to a study commissioned by the National Bureau of Economic Research in Massachusetts and conducted by researchers at Columbia University.

Led by Christopher Mayer, senior vice dean and professor of real estate at Columbia Business School, the research team examined the modification policies of Countrywide Financial.

In 2008, as a result of lawsuits brought by a number of states, Countrywide agreed to offer modifications to seriously delinquent borrowers with subprime mortgages throughout the country.

The researchers found that Countrywide's relative delinquency rate increased 13 percent per month immediately after the program's announcement.

According to the analysis, default rates increased the most among borrowers least likely to default, including those with substantial liquidity available through credit cards and low combined loan-to-value ratios with some equity in their homes.

The researchers say their findings suggest strategic behavior should be an important consideration in designing mortgage modification programs and developing eligibility criteria.

The common approach has been to extend benefits only to homeowners who are delinquent, usually by at least two payments. This approach, however, can prompt homeowners to default even though they have the means to stay current, the researchers explained.

An alternative, they say - one which alleviates the risk of strategic default - is to offer modifications only to homeowners who undergo a rigorous audit that verifies they are likely to default, or have defaulted, as a result of adverse conditions.

Such an audit, according to the research paper, would assess the home's value and the homeowner's current income and credit rating.

There is a trade-off to deterring strategic behavior, however. The study notes that because this costly verification approach is time-consuming, it may fail to extend benefits to homeowners before they enter foreclosure or decide to exit their homes, and as a result could lead to higher costs for both borrowers and lenders.

Countrywide committed to offer expedited, unsolicited loan modifications to borrowers who were at least 60 days delinquent. The researchers note three distinct features of the Countrywide settlement: its unexpected public announcement in advance of its implementation, its nationwide coverage, and its requirement that a borrower be delinquent in order to receive benefits.

Data show that defaults soared immediately after the announcement - up as much as 20 percent for some borrower and loan types - with most of the increase the result of strategically planned defaults by homeowners who had access to significant liquidity and positive equity.

"Although our results document strategic behavior in response to mortgage modification policies...that use simple but manipulable eligibility criteria," the researchers wrote, "we cannot say whether the economic costs of strategic behavior are large relative to the potential gains to borrowers, lenders, and neighborhoods from these policies. Our results instead highlight a trade-off."

Equifax, BlackBox Logic, 1010Data, and Zillow contributed data and research support for the study.

Author: Carrie Bay

Law Offices of J. Arthur Roberts
Joseph Arthur Roberts, Attorney at Law
Newport Beach Office

Main: (949) 675-9900
3345 Newport Blvd., Suite 213
Newport Beach, CA 92663
Fax: (888) 989-9309
joe@jarlegal.com

Wells Fargo fined $85 Million for ripping off borrowers...who gets the money?

Home Law Realty — Fri, 22 Jul 2011 20:40:00 GMT

Firm commentary: The facts stated in the article below should come as no shock. This type of business practice was the norm within the sub-prime mortgage culture. $85 million is a drop in the bucket compared to the profits that were generated. One wonders if the victimized consumers will ever see a dime of that money...doubtful.

Wells Fargo's big mortgage rip-off
By Colin Barr July 20, 2011: 5:41 PM ET
http://finance.fortune.cnn.com/2011/07/20/wells-fargos-big-mortgage-ripoff/
What do you have to do to get slapped with the Federal Reserve's biggest-ever consumer-protection fine?
You have to rip off mortgage borrowers by the thousand. The Fed alleges Wells Fargo (WFC) did just that during the housing boom, bilking "possibly more than 10,000" out of sums reaching as high as $20,000 by slapping them with high-cost loans when they would have qualified for cheaper ones.
The Fed fined Wells $85 million Wednesday for fraud, deceptive claims and unsafe banking practices for its mortgage lending practices between 2004 and 2008. It also told the bank to compensate wronged customers. Those sums could run into the millions of dollars, going by Fed figures.
What did Wells do? Commission-hungry salespeople at Wells Fargo Financial, a subprime loan shop the bank shut down last year after the mortgage market cratered, "altered or falsified income documents and inflated prospective borrowers' incomes to qualify those borrowers for loans that they would not otherwise have been qualified to receive," the Fed said. In a familiar tale, the bank also sold people who would have qualified for low-cost loans costlier ones.
Wells, of course, neither admitted nor denied anything - except for having a culture of fairness. Of some 300,000 loans it made over the relevant period, just 4% or so were abusive, the bank estimates. A spokesman says Wells doesn't have any estimates of the ultimate cost of making customers whole, because it must first identify those wronged in a Fed-supervised process.
"The alleged actions committed by a relatively small group of team members are not what we stand for at Wells Fargo," said CEO John Stumpf. Thank goodness for small favors.

FED refuses to release investigation details to U.S. Senate-"It is not acceptable to violate the law, and it is not acceptable to do robo-signings"-Senator Menendez

Home Law Realty — Thu, 21 Jul 2011 20:35:00 GMT

Firm commentary: The article below reports that Federal Reserve Chairman Ben Bernanke and Acting Comptroller of the Currency John Walsh are refusing to release details of their investigations into illegal foreclosure practices by the nation's largest banks. This position by the Fed is taken despite published reports that banks are continuing to use robo-signers to facilitate the illusion of valid foreclosure.

Regulators balk at demands for foreclosure reports
July 21, 2011 12:28 PM ET
By DANIEL WAGNER
http://money.msn.com/business-news/article.aspx?feed=AP&date=20110721&id=13974656
WASHINGTON (AP) - Banking regulators refused to commit to releasing details of their investigations into illegal foreclosure practices by the nation's largest banks.
Appearing before a Senate panel Thursday, Federal Reserve Chairman Ben Bernanke and Acting Comptroller of the Currency John Walsh said they had not decided whether to release reports on illegal practices by individual banks
Sen. Robert Menendez, D-N.J, had pressed them to release the reports, banks' individual action plans and agreements with the consultants that investigated the banks. Menendez cited a report by the Associated Press this week that said banks are continuing to foreclose without doing the necessary paperwork, eight months after they had promised to stop.
"We will have to evaluate the individual documents and see if there is anything that would be of a confidential, supervisory nature," Walsh said, adding that his agency will release "some information."
Bernanke said the Fed plans to release a report that "will explain what the findings were and what the proposals were and what the reactions were." But he said he must consult with his legal team before releasing any information about individual banks.
Citing a legal opinion by his staff, Menendez said the regulators are permitted to release the information if doing so was in the public's best interest.
"It is not acceptable to violate the law, and it is not acceptable to do robo-signings," Menendez said.
County officials in at least three states say they have received thousands of mortgage documents with questionable signatures since last fall, suggesting that the practices, known collectively as "robo-signing," remain widespread in the industry, the AP reported Monday.
Last fall, the nation's largest banks and mortgage lenders, including JPMorgan Chase, Wells Fargo, Bank of America and an arm of Goldman Sachs, suspended foreclosures while they investigated how corners were cut to keep pace with the crush of foreclosure paperwork.
Since then, suspect paperwork has been filed not only with foreclosures, but also with new purchases and refinancings. Critics there is a systemic problem with the paperwork involved in home mortgages and titles. They say banks and mortgage processors haven't acted aggressively enough to put an end to widespread document fraud in the mortgage industry.
Bernanke and Walsh were testifying before a hearing to mark the one-year anniversary of a sweeping overhaul of the rules governing the financial system.
Copyright 2011 The Associated Press. All rights reserved.

New CA law eliminates second mortgage liability after short sale, but not foreclosure...but read the fine print

Home Law Realty — Wed, 20 Jul 2011 20:40:00 GMT

Firm commentary: Effective July 15, 2011....Jerry Brown signed a new law that prevents junior lien holders from pursuing deficiency judgments from homeowners if the lender agrees to a short sale. This sounds good, but one has to wonder if this won't hurt short sale processing times. If a property is sold at a foreclosure sale, borrowers are still liable for the junior liens. Knowing this, junior lien holders may hold out for more money at closing or veto the deal so as to preserve the right to pursue the entire debt. Since, all proceeds must come from the sale and not the borrower, this may drive prices up as junior lien holders insist on higher prices to satisfy their claims at closing. Finally, this bill does not address the tax implications of cancelled debt from the short sale. See IRS form 4681. http://www.irs.gov/pub/irs-pdf/p4681.pdf. Contact the firm for a detailed analysis of your situation.

BILL NUMBER: SB 458 CHAPTERED
BILL TEXT
CHAPTER 82
FILED WITH SECRETARY OF STATE JULY 15, 2011
APPROVED BY GOVERNOR JULY 11, 2011
PASSED THE SENATE MAY 23, 2011
PASSED THE ASSEMBLY JULY 1, 2011
AMENDED IN SENATE MAY 16, 2011
AMENDED IN SENATE APRIL 4, 2011
AMENDED IN SENATE MARCH 21, 2011

INTRODUCED BY Senator Corbett
(Principal coauthors: Senators Correa and Vargas)
(Coauthors: Assembly Members Blumenfield and Skinner)

FEBRUARY 16, 2011

An act to amend Section 580e of the Code of Civil Procedure,
relating to mortgages, and declaring the urgency thereof, to take
effect immediately.

LEGISLATIVE COUNSEL'S DIGEST

SB 458, Corbett. Mortgages: deficiency judgments.
Existing law prohibits a deficiency judgment under a note secured
by a first deed of trust or first mortgage for a dwelling of not more
than 4 units in any case in which the trustor or mortgagor sells the
dwelling for less than the remaining amount of the indebtedness due
at the time of sale with the written consent of the holder of the
first deed of trust or first mortgage. Existing law provides that
written consent of the holder of the first deed of trust or first
mortgage to that sale shall obligate that holder to accept the sale
proceeds as full payment and to fully discharge the remaining amount
of the indebtedness on the first deed of trust or first mortgage.
Existing law specifies that those provisions would not limit the
ability of the holder of the first deed of trust or first mortgage to
seek damages and use existing rights and remedies against the
trustor or mortgagor or any 3rd party for fraud or waste if the
trustor or mortgagor commits either fraud with respect to the sale
of, or waste with respect to, the real property that secures that
deed of trust or mortgage. Existing law makes these provisions
inapplicable if the trustor or mortgagor is a corporation or
political subdivision of the state.
This bill would expand those provisions to prohibit a deficiency
judgment upon a note secured solely by a deed of trust or mortgage
for a dwelling of not more than 4 units in any case in which the
trustor or mortgagor sells the dwelling for a sale price less than
the remaining amount of the indebtedness outstanding at the time of
sale, in accordance with the written consent of the holder of the
deed of trust or mortgage if the title has been voluntarily
transferred to a buyer by grant deed or by other document that has
been recorded and the proceeds of the sale are tendered as agreed.
The bill would also provide that, in other circumstances, when the
note is not secured solely by a deed of trust or mortgage for a
dwelling of not more than 4 units, no judgment shall be rendered for
any deficiency upon a note secured by a deed of trust or mortgage for
a dwelling of not more than 4 units, if the trustor or mortgagor
sells the dwelling for a sale price less than the remaining amount of
the indebtedness, in accordance with the written consent of the
holder of the deed of trust or mortgage. The bill would provide,
following the sale, in accordance with the written consent, the
voluntary transfer of title to a buyer, as specified, and the tender
of the sale proceeds, the rights, remedies, and obligations of any
holder, beneficiary, mortgagee, trustor, mortgagor, obligor, obligee,
or guarantor of the note, deed of trust, or mortgage, and with
respect to any other property that secures the note, shall be treated
and determined as if the dwelling had been sold through foreclosure
under a power of sale, as specified. The bill would prohibit the
holder of a note from requiring the trustor, mortgagor, or maker of
the note to pay any additional compensation, aside from the proceeds
of the sale, in exchange for the written consent to the sale. The
bill would provide that these provisions are inapplicable if the
trustor or mortgagor is a corporation, limited liability company,
limited partnership, or political subdivision of the state. The
provisions would also be inapplicable to any deed of trust, mortgage,
or other lien given to secure the payment of bonds or other evidence
of indebtedness authorized, or permitted to be issued, by the
Commissioner of Corporations, or that is made by a public utility
subject to the Public Utilities Act. The bill would provide that any
purported waiver of these provisions shall be void and against public
policy.
This bill would declare that it is to take effect immediately as
an urgency statute.

THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:

SECTION 1. Section 580e of the Code of Civil Procedure is amended
to read:
580e. (a) (1) No deficiency shall be owed or collected, and no
deficiency judgment shall be requested or rendered for any deficiency
upon a note secured solely by a deed of trust or mortgage for a
dwelling of not more than four units, in any case in which the
trustor or mortgagor sells the dwelling for a sale price less than
the remaining amount of the indebtedness outstanding at the time of
sale, in accordance with the written consent of the holder of the
deed of trust or mortgage, provided that both of the following have
occurred:
(A) Title has been voluntarily transferred to a buyer by grant
deed or by other document of conveyance that has been recorded in the
county where all or part of the real property is located.
(B) The proceeds of the sale have been tendered to the mortgagee,
beneficiary, or the agent of the mortgagee or beneficiary, in
accordance with the parties' agreement.
(2) In circumstances not described in paragraph (1), when a note
is not secured solely by a deed of trust or mortgage for a dwelling
of not more than four units, no judgment shall be rendered for any
deficiency upon a note secured by a deed of trust or mortgage for a
dwelling of not more than four units, if the trustor or mortgagor
sells the dwelling for a sale price less than the remaining amount of
the indebtedness outstanding at the time of sale, in accordance with
the written consent of the holder of the deed of trust or mortgage.
Following the sale, in accordance with the holder's written consent,
the voluntary transfer of title to a buyer by grant deed or by other
document of conveyance recorded in the county where all or part of
the real property is located, and the tender to the mortgagee,
beneficiary, or the agent of the mortgagee or beneficiary of the sale
proceeds, as agreed, the rights, remedies, and obligations of any
holder, beneficiary, mortgagee, trustor, mortgagor, obligor, obligee,
or guarantor of the note, deed of trust, or mortgage, and with
respect to any other property that secures the note, shall be treated
and determined as if the dwelling had been sold through foreclosure
under a power of sale contained in the deed of trust or mortgage for
a price equal to the sale proceeds received by the holder, in the
manner contemplated by Section 580d.
(b) A holder of a note shall not require the trustor, mortgagor,
or maker of the note to pay any additional compensation, aside from
the proceeds of the sale, in exchange for the written consent to the
sale.
(c) If the trustor or mortgagor commits either fraud with respect
to the sale of, or waste with respect to, the real property that
secures the deed of trust or mortgage, this section shall not limit
the ability of the holder of the deed of trust or mortgage to seek
damages and use existing rights and remedies against the trustor or
mortgagor or any third party for fraud or waste.
(d) (1) This section shall not apply if the trustor or mortgagor
is a corporation, limited liability company, limited partnership, or
political subdivision of the state.
(2) This section shall not apply to any deed of trust, mortgage,
or other lien given to secure the payment of bonds or other evidence
of indebtedness authorized, or permitted to be issued, by the
Commissioner of Corporations, or that is made by a public utility
subject to the Public Utilities Act (Part 1 (commencing with Section
201) of Division 1 of the Public Utilities Code).
(e) Any purported waiver of subdivision (a) or (b) shall be void
and against public policy.
SEC. 2. This act is an urgency statute necessary for the immediate
preservation of the public peace, health, or safety within the
meaning of Article IV of the Constitution and shall go into immediate
effect. The facts constituting the necessity are:
In order to mitigate the impact of the ongoing foreclosure crisis
and to encourage the approval of short sales as an alternative to
foreclosure, it is necessary that this act take effect immediately.