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  • June 2018
    M T W T F S S
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  • Mary K. Lenahan, J.D., Realtor

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Bank of America Employees Told To Lie and To Deny Qualified Loan Modification Requests

Bank of America Center, Financial District San Francisco

Bank of America Center, Financial District San Francisco


“We were told to lie to customers,” said Simone Gordon, who worked in the bank’s loss mitigation department until February 2012. “Site leaders regularly told us that the more we delayed the HAMP [loan] modification process, the more fees Bank of America would collect.”



California San Francisco Assessor Finds Widespread Violations of Laws by Banks in Foreclosure Process

I hope this is treated more seriously than the banks’ huge robo-signing fraud.  To my knowledge, no one was ever prosecuted for that widespread fraud.  The Banks received a slap on the hand and the settlement involved a promise by the banksters to stop fraudulently manufacturing documents.!

New CA Law: Expanded Protection for Sellers against Deficiency Judgments after Short Sales

Altadena Home, Poppyfields Neighborhood

Altadena Home, Poppyfields Neighborhood

On July 15, 2011 California Governor Brown signed into law Senate Bill 458 which provides greater protection to sellers in short sale transactions from personal liability.

The new law prohibits any lienholder, regardless of whether it is a senior or junior lienholder, who agrees to a short sale from pursuing the seller for a deficiency judgment.  In other words the lender cannot sue the borrower for the difference between the sale proceeds and the balance on the note.

Senate Bill 458 extends the protection against deficiency judgments contained in the recently passed Senate Bill 931 which became effective on January 1, 2011.    Senate Bill 931 merely prohibited the first lienholder from pursuing a deficiency judgment following a short sale.

The California Association of Realtors (CAR) opposed SB 931, arguing that it did not go far enough since it did not include junior lien holders.   CAR sponsored SB 458 to include all lien holders and was able to successfully see the bill pass this month.

According to C.A.R. President Beth L. Peerce:

“SB 458 brings closure and certainty to the short sale process and ensures that once a lender has agreed to accept a short sale payment on a property, all lienholders– those in first position and in junior positions – will consider the outstanding balance as paid in full and the homeowner will not be held responsible for any additional payments on the property.”

SB 458 will amend California Civil Procedure section 580e.   [C.C.P. section 580e].

Can the Lender Force a Seller to Pay Money Over the Sale Price?

Like most things in law, the answer depends upon how you frame the facts.   The statute specifically prohibits a note holder from requiring additional compensation from the seller:

“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.C.P. section 580e(b)

According to CAR, however, the above provision does not prohibit a homeowner from “voluntarily” offering additional monies to the lender with the hopes that a lender will agree to a short sale.   A lender may also negotiate for a contribution from someone other than the borrower, such as other lenders, agents, and relatives.

When is the Effective Date of Senate Bill 458?

SB 458 is effective immediately due to the “urgency” of the need to mitigate “the ongoing foreclosure crisis and to encourage the approval of short sales as an alternative to foreclosure”

Will the New Law Help Homeowners?

Like most laws passed purporting to “assist homeowners,” the cards are stacked in favor of the bank/lender/purported note-holder, whoever that may be.   The purported note-holder still has absolute authority to decide whether to accept a short sale or not, and is not required to consider the homeowner’s interests at all.

Financial contribution by the Seller is still an item of negotiation since a “voluntary” contribution may be necessary to obtain the lender’s agreement to a short sale.

The legislation does, however, provide important protection against homeowners unknowingly exposing themselves to deficiency judgments by short selling their homes.

What Kind of Properties Qualify for Protection under the amendment to C.C.P 580e /SB 458?:

The deficiency judgment prohibition applies to a broad category of 1 to 4 residential units with exceptions noted below.  It applies to:

•Cash-Out Refinanced loans

•Non-Owner Occupied Homes

•Second Homes

•Vacation Homes

Are There Exceptions to C.C.P. section 580e? (SB 458):

Section 580e does not apply in the following circumstances:

  • Where debtor is a corporation, limited  liability company, limited partnership, or political subdivision of the state.   C.C.P.  580e( d)(1).
  • Where debtor engages in fraud in the sale or waste of the property  C.C.P. 580e( c).
  • A lien secured by a bond as specified; a public utility lien; and additional rules apply if a note is cross-collateralized by more than one property.    C.C.P. 580e(d)(2).
  • For other exceptions that may apply to your specific factual scenario, speak to a lawyer.

How to Close a Short Sale when There are Insufficient Funds to Pay CaliforniaTax Liens

Altadena Home, Poppyfields Neighborhood

Altadena Home, Poppyfields Neighborhood

One of many potential obstacles to successfully closing a Short Sale are liens recorded against the property.   There are several kinds of liens, such as, among others, mechanic’s liens, judgment liens, child support liens, spousal support liens, and California State Tax liens.

A lien on the property is security for payment of a debt.   A lien generally prevents the sale or refinance of a property unless the lien is satisfied first.   A lien generally carries with it the right to sell the property to satisfy the debt.    In order for a lien to be enforceable, it must be recorded with the County Recorder’s office in the county where the property is located.

A California State Tax Lien may arise if you have unpaid California income taxes, corporate income taxes, or employee payroll taxes, and the Franchise Tax Board records a State Tax Lien against you for those unpaid taxes with the County Recorder’s office.

If there is a California State Tax lien on the property, however, you may still be able to Short Sale the house without paying off the State Tax Lien, under a Partial Release of Lien for Short Sale.   Under this program, the taxpayer submits an application to the Franchise Tax Board for a partial release showing, among other things, that there will be insufficient escrow funds to pay a State Tax Liens in the short sale transaction.

If the Franchise Tax Board approves an application for a Partial Release in a short sale transaction, then it will releases the specific property from the lien.   The release, however, is only a partial releasse because the lien remains in effect against the taxpayer personally and continues to encumber other property the taxpayer may own, or property the taxpayer may acquire in the future.

It takes approximately 21 working days to get a response to an application for a Partial Release of a Lien for Short Sale.    The escrow or title representative handling the Short Sale transaction should send the following documents to support the application:
1. Letter of explanation detailing the request.
2. Estimated closing statement.
3. Current preliminary title report that includes the legal description of the property.
4. Current appraisal.
5. Documentation to substantiate all lien payoffs through escrow.
6. Lender’s Short Sale Approval.

The above documents should be sent by title or escrow via overnight mail to:
Attn: Lien Resolution Unit – Mail Stop A317
Franchise Tax Board
Sacramento, CA 95827

Some of the factors that the Franchise Tax Board will consider are:
1. The reason and substantiation for the request.
2. Whether the the property is being sold at, or near fair market value and whether verification has been provided.
3. Whether industry standard fees/commissions are charged.
4. Whether only senior lien holders and/or judgment creditors are paid.


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