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  • March 2011
    M T W T F S S
    « Feb   Apr »
  • Mary K. Lenahan, J.D., Realtor

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New Law: No Deficiency Judgments on 1st Mortgages Allowed in Short Sales

Altadena Home

Altadena Home

Effective January 1, 2011, the short sale of a dwelling (4 units of less) prohibits a deficiency judgment on a note secured by a first trust deed.  C.C.P.   580e , (Senate Bill 931). *

Although this new law will be helpful in facilitating short sales,  the law does not go far enough, according to the California of Association of Realtors (CAR).

CAR had urged legislators to go further and prohibit the junior lien holders from seeking a deficiency judgments as well.   It is often junior lien holder(s) who interfere with a short sale by refusing to release the right to pursue  a deficiency judgment.

This deficiency judgment prohibition on first deeds of trust applies to a broad category of  dwellings.   The new law, codified at California Code of Civil Procedure section 580e applies to:

  • 1 to 4 Residential Units
  • Cash-Out Refinanced loans
  • Non-Owner Occupied Homes
  • Second Homes
  • Vacation Homes

*C.C.P. section 580e has been amended to include all lienholders, senior and junior lienholders, pursuant to SB 458 sponsored by the California Association of Realtors and which became effective on 7-15-11.


Mary K. Lenahan, JD, Realtor
626) 798.9050 / Cell*Text: 626.226.6056
Dilbeck Real Estate Real Living
Short Sales & Probate Real EstateTransactions

DRE 01867737


2 Responses

  1. […] Bill ["SB"] 458 extends the protection against deficiency judgments contained in  Senate Bill 931 .  Senate Bill 931 merely prohibited the first lien holder from pursuing a deficiency judgment […]

  2. […] Bill 458 extends the protection against deficiency judgments contained in the recently passed Senate Bill 931 which became effective on January 1, 2010.    Senate Bill 931 merely prohibited the first lien […]

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