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  • Mary K. Lenahan, J.D., Realtor

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.
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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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Mortgage Servicers Make More Money if Mortgage is in Default – They Have Quotas to Meet to Foreclose


The above may shed light on why Mortgage Servicers do not modify loans in good faith. Per former EMC Mortgage Coproration employee fired for “helping” elderly homeowners. It was more profitable to foreclose.

“I believe that banking institutions are more dangerous to our liberties than standing armies. If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around the banks will deprive the people of all property – until their children wake-up homeless on the continent their fathers conquered.”
Thomas Jefferson, 1802

House GOP Unveils Bills To Speed Closure of Fannie, Freddie


U.S. Capital

Click on Photo for Link to Article

NACA L.A. Loan Modification Save the Dream Event: How to Avoid Waiting in Long Lines


Pasadena CA Home

Pasadena CA Home

How do you go to the front of the line at the upcoming Save the Dream Event in Los Angeles June 25 to 29th at the L.A. Sports Arena?    Volunteer.

NACA is a non-profit HUD Certified organization which represents itself to be the largest and most powerful and effective advocate for homeowners in the country.   NACA holds large loan modification events called Save the Dream.

NACA has contracts with most major lenders including Bank of America, Chase, (includes EMC and Washington Mutual), Citigroup, Wells Fargo, GMAC, HSBC, and Indy Mac/OneWest, all of which participate in NACA’s Save the Dream events which they take on the road and travel with them from city to city.

NACA relies on hundreds of volunteers at each event to run each Save the Dream Event multi-day loan modification fest.  You put in 8 hours volunteer time and you get “VIP” status to speak to a NACA Counselor.  To participate you must attend a Volunteer Meeting this Friday at 6:00 pm at the L.A. Sports Arena.

Here’s a memo from NACA’s Volunteer Coordinator, Linda Moten:


NACA

Neighborhood Assistance Corporation of America 

Save the Dream Event is coming back to 

Los Angeles, California

 VOLUNTEER MEETING!!

Date: Friday, June 24, 2011

Time: 6:00 p.m.

 LA Sports Arena 3939 S. Figueroa St Los Angeles Ca 90037

To receive the VIP STATUS

THERE WILL BE ONE VOLUNTEER MEETING the night before the Event

In addition, New Purchases Member will receive their confirmation Volunteer Participation Letter

All Volunteers who participate during this event will receive VIP with a

Designated Counselor seating area

At the

Save the Dream Event

Los Angeles Sport Arena

I hope to see you soon!

Linda Moten

Thank you in advance! 

BRING THIS LETTER WHEN YOU COME; THIS IS YOUR BUILDING PASS !!

End of memo

6-27-11:  News Update from NACA:  No lines at the L.A. Sports Arena event!  Bring your documents and attend NACA’s Save the Dream Event 

Go to the Front of the Line for VIP Counseling by Volunteering at NACA’s Milwaukee Save the Dream Loan Modification event – NACA Milwaukee Volunteer Meeting is August 4, 2011 at 6pm at the Frontier Airlines Center, 4th Street & Wisconsin Avenue.

For further information on volunteering at a Save the Dream event, contact Ruth Saldana at rsaldana@naca.com   Go to NACA.com for Save the Dream Schedule.


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DRE 01867737

 

 

 

NACA Loan Modifications: It Takes Not a Village, but a Whole Country to Keep the Dream Alive


Bank of America Center, San Francisco

Bank of America Center, San Francisco

In 2008, shortly after the financial crisis hit, I offered my legal services to distressed homeowners to negotiate loan modifications.

I felt I could provide my clients great services in this area due to my negotiating and writing skills developed from years of settling litigated disputes and writing persuasive motions and appellate briefs.

I learned very quickly, however, that the “loan modification process” was a farce.   The banks’ advertisements about their purported desire to help borrowers were patently false, mere propaganda fed to the American Public at cost of most likely millions of dollars in advertising dollars.

The collapse of Wall Street and the U.S. & World economies didn’t seem to daunt the financial industry’s  greed or audacity one bit.  (See e.g Aritcle re: bank executives multi-million dollar bonuses after bail out)

My experience with “negotiating” loan modifications for my clients was very much like what Congresswoman Maxine Waters’ experienced. (See video of Maxine Waters:  Behind the Bank’s Verbiage on Loan Modification

After our U.S. Congress rushed to the banks’ rescue with multi-billion dollar bail outs, it eventually passed some legislation purporting to help American Homeowners.   As we have seen since then, however, these programs have been deemed failures.   See:  Hope For Homeowners Offer Limited Hope;   See article why Home Affordable Modification Program [HAMP] is a failure.

The program titles were mere puffery; the substance of these governmental programs lacked any “teeth”.   But why does that surprise anyone since our own U.S. Congress members admit the banks are running the U.S. Congress.

So who can help Americans? Or rather how can American help themselves?

One organization which seems to be able to buck the power of the banks and help homeowners get reasonable loan modifications is the Neighborhood Assistance Corporation of America (NACA).

NACA is a non-profit HUD Certified organization which represents itself to be the largest and most powerful and effective advocate for homeowners in the country.

What makes NACA succeed where our Legislature has failed?   First, its probably due to NACA’s CEO Bruce Marks’ passion and commitment to fight abuse by the financial industry.  Second, NACA relies upon public support and active participation which it claims is critical to its success.

For example in 2009  NACA and over 350 homeowners protested at some of the lenders’ CEOs’ estate homes demanding the banks take responsibility for the financial carnage they created.  Also, Bruce Marks and homeowners frequently protest against banks at congressional hearings (see video protesting during testimony by Chase Bank).

These controversial tactics and publicity, however, have worked.  NACA has contracts with major lenders and servicers who are participating in NACA’s Save the Dream Tour and  giving loan modifications.  Participating Lenders include Bank of America, Chase (includes EMC and Washington Mutual), Citigroup, Wells Fargo, GMAC, HSBC, and Indy Mac/OneWest,.

Now, however, the Banks want to take Mr. Marks and NACA down, and apparently, their pressure on the government is working because HUD’s Secretary Shaun Donovan  is proposing the defunding of NACA which would put an end to what appears to be the most effective loan modification assistance for Americans.

What can you do?   Speak out and defend NACA.  Call and e-mail HUD Secretary Shaun Donovan and Treasury Secretary Timothy Geithnerand.

NACA suggest some good questions to ask are:

Why is HUD trying to destroy NACA, the most successful program to prevent foreclosures?

Why won’t it meet with NACA over this issue?

Why do you propose to defund NACA when the government’s own programs purporting to “help” American homeowners have been failures?

Instead of destroying NACA why don’t the government programs learn from NACA’s success?

HUD Secretary  Shaun Donovan  can be contacted via e-mail  Shaun.1.donovan@hud.gov  or phone: (202) 708-1979

Treasury Secretary Timothy Geithner can be contacted by  e-mail:  Timothy.Geithner@do.treas.gov  or phone number (202) 622.1100.

Call or e-mail your Congressperson and Senator as well.

To join NACA’s Defense Committee contact NACA at email:  Defenders@NACA.com or call its Campaign Coordinator, Daniel Perez at (617) 250.6222 ext. 1218.

Per NACA:  “Your Support is Crucial – Defend NACA”

To volunteer at NACA’s Milwaukee Save The Dream Event attend the August 4th Volunteer Meeting at Frontier Airlines Center at , at 4th Street & Wisconsin Avenue

“I believe that banking institutions are more dangerous to our liberties than standing armies. If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around the banks will deprive the people of all property – until their children wake-up homeless on the continent their fathers conquered.”
Thomas Jefferson, 1802

For further information on volunteering at a Save the Dream Event, contact Ruth Saldana at rsaldana@naca.com.   Go to NACA.com for schedule of Save the Dream Tour.

Loan Modifications – NACA’s Save the Dream Tour – Who Qualifies – What to Bring

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Some Advice to California Legislature on Balancing the Budget


We the People of California

We the People of California

Balance our priorities,
balance the scales of justice

Dear ACLU Friend,

Forty years ago last week, Richard Nixon declared war — on
drugs. This war has had no effect on the supply or demand for drugs. But it has
made the United States the world leader in incarceration, and tipped California’s
spending priorities toward prisons
and away from public universities.

Last month, the United States Supreme Court ruled
that extreme overcrowding has brought California prisons to a “breaking point,”
characterized by “needless suffering and death.” The Court has spoken, declaring
that California must reduce its prison
population by approximately 33,000 people over two years.

Now it’s your turn to speak.

The ACLU of California is launching a
petition campaign to focus our political leaders’ attention on the need for
sentencing reform. Please sign and share the
petition with your friends
.

Nearly 8,500 people are currently locked up with felony sentences in
California for non-violent low level offenses – like possessing a small amount
of drugs for personal use – at a cost to taxpayers of over $442 million per
year.

We can save money and keep our communities safe by reserving felony sentences
for serious crimes.

Thank you for joining the ACLU in calling on the Governor and our legislators
to cut wasteful spending in the prison system.

Clarissa_Woo_headshot Thanks for all that you do,
CWoo_signature.gif
Clarissa Woo
Director of Policy
Advocacy

 

Join ACLUThe ACLU was founded to defend and secure the rights granted
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