California home loans originated after January 1, 2013 will include new anti-deficiency protection

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Real Estate Agent with Coldwell Banker Brokers of the Valley, Yountville Napa Valley

New Anti-Deficiency Protection for Refinance Loans Made After January 1, 2013

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Starting January 1, 2013, a new California law will protect homeowners who default on their refinance loans from personal liability for any deficiency following foreclosure. Existing anti-deficiency law protects a borrower from personal liability for the difference between the principal balance and what the lender receives at foreclosure if the loan is a purchase money loan secured by an owner-occupied property with one-to-four residential units. The new law, Senate Bill 1069, extends that anti-deficiency protection to include any loan used to refinance the purchase money loan, plus any loan fees, costs, and related expenses for the refinance. The anti-deficiency protection, however, does not extend to any "cash out" in a refinance, which is when the lender advances new principal not applied to any obligation owed under the purchase money loan. This new law does not affect the other anti-deficiency protections for non-judicial foreclosures (or trustee's sales) and seller financing.

This new law only applies to refinance loans or other credit transactions used to refinance a purchase money loan, or subsequent refinances of a purchase money loan, that are executed on or after January 1, 2013. For purposes of this law, any payment of principal shall be deemed to be applied first to the principal balance of the purchase money loan, and then to the principal balance of any new advance and interest payments shall be applied to any interest due and owing.

C.A.R. supported Senate Bill 1069 in the legislative process as many homeowners do not realize that, by refinancing, they lose their anti-deficiency protection for a purchase money loan. Senate Bill 1069 is similar to Senate Bill 1178 sponsored by C.A.R. in 2010, but vetoed by Governor Schwarzenegger. The full text of the law is available at www.leginfo.ca.gov.

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Rainmaker
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David Grbich
Ventana Coastal Properties - www.FindCARealEstate.com - San Juan Capistrano, CA
Orange County Real Estate - 949-500-0484

Curtis - thanks for sharing - good protection for homeowners going forward - Regards Dave

July 18, 2012 06:52 AM #1
Rainmaker
534,303
Curtis Van Carter
Coldwell Banker Brokers of the Valley, Yountville Napa Valley - Yountville, CA
Napa Valley's Broker Extraordinaire in Yountville

Dave

Thanks for your two cents, cheers cvc

July 18, 2012 07:01 AM #2
Rainmaker
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Robert (Bob) Gilbert
Berkshire Hathaway HomeServices Anderson Properties - Katy, TX
Your Katy TX Real Estate Expert

Curtis,

This new law provides important protection to folks who refinance their loans. I am not really sure what if any measures protect homeowners in Texas. Thanks for the update. Your blog is always loaded with excellent information. 

July 18, 2012 03:10 PM #3
Rainmaker
609,467
Yolanda Cordova-Gilbert
David Weekley Homes - Katy, TX
David Weekley Homes in Cinco Ranch

Curtis,

            I agree with Bob I love to read your blogs they are very interesting. I hope you are having a better week than mine!

July 18, 2012 07:17 PM #4
Rainmaker
534,303
Curtis Van Carter
Coldwell Banker Brokers of the Valley, Yountville Napa Valley - Yountville, CA
Napa Valley's Broker Extraordinaire in Yountville

Yolanda

Hopefully yours will change for the better and Bob, thanks as always. Unfortunately, this only for us wacky west-coasters.

cheers cvc

July 19, 2012 12:54 PM #5
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Curtis Van Carter

Napa Valley's Broker Extraordinaire in Yountville
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