How California Foreclosure Laws affect California Homeowners...
California is effectively a no-deficiency-judgment state. To be more clear, its possible to get a deficiency judgment in California, but is it probable... The answer is... the lender has to foreclose through a lawsuit in order to do this, which never happens. Unless you have huge amount of assets and you tried to do a loan modification where you disclosed all your income and assets (sneaky huh).
Thats because California lenders are subject to two regulations that work in favor of the borrower:
1. When pursuing any secured obligation like a home loan, they are required to try to collect from the collateral first, before going after the debtor; and
2. California has something known as the One Action Rule: when collecting a debt, you only get one shot at it (kind of like a no-double-jeopardy thing). So how does that help the borrower? Well, most loans in California are secured with a Trust Deed, rather than a Mortgage. A Trust Deed allows the lender to foreclose on a house non-judicially, without going to court. This is much cheaper and faster that foreclosing judicially (in court), so it is inevitably what the lenders do. Foreclosing through the courts is slow and expensive, and unless the borrow has a TON of assets, its just not worth it.
However, you cant get a judgment through non-judicial foreclosure; you can only get the property. So in order for the lender to get a deficiency judgment, theyd have to go to court. BUT: here comes that pesky one action rule. Guess what? By foreclosing non-judicially, the lender has exhausted their one shot. Now they *cant* go to court for a deficiency judgment!
The lender *could* of course, start out by foreclosing in court (judicial foreclosure), and then get a deficiency judgment as part of that proceeding after the foreclosure sale has occurred, but in practice it never happens.
Theres also outright ban on deficiency judgments in California when the loan is a purchase-money loans. Purchase-money loans (as opposed to a refinance) are non-recourse: you cant go after the borrower, ever. You can only go after the collateral property (for 1-4 unit owner-occupied props).
For these reasons, deficiency judgments are effectively non-existent in California on 1st mortgage notes.
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Disclosure:
I am not an attorney, CPA or any consultant. Please consult for professional advice.
How Securitized Mortgage Loans Affect Short Sale Negotiation...
For so many Southern California homeowners who are upside down on their homes, they maybe forced to sell for less than what the house is worth (short-sale).
This process called short sale negotiation can be very difficult to understand if you do not understand the secondary market of mortgage finance. Just keep in mind most mortgages are originated or made with intent to be pooled with other mortgages and sold to large institutional investors such as pension funds, hedge funds, banks, etc. etc.
The mortgage pools are often referred to as Collateralized Debt Obligations or CDOs. for short.
Follow along, as Jeff to explains in laymen terms
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