Additional Anti-Deficiency Protection is Almost Here!
On Thursday, August 19, the California Senate approved SB1178. This bill extends anti-deficiency protections to homeowners who refinanced their mortgages, but didn’t take any cash out, and are now facing foreclosure.

Ok, in plain english: Most people don’t realize, that when they’ve refinanced their existing mortgage to get a lower payment, that mortgage now becomes hard money. It’s considered purchase money when a buyer takes out a loan to buy a home. Purchase money for a personal residence in California is not subject to a deficiency judgment. But the rules change when an owner refinances. Hard money loans are subject to deficiencies. This means if an owner who has refinanced does a short sale, that lender can come after the owner to collect the difference between the amount the bank received and the amount owed. In a word, that sucks.

So…If signed into law, this would be a stop to deficiencies on California home refinances, where the owner only refinanced the purchase money loan and didn’t take out cash for any other purpose (except for home improvement).

To make this the law, Governor Schwarzenegger needs to sign it into law. His office has indicated which way he’s leaning; to sign or not to sign. So, at this point, it could depend on what he has for breakfast that day .

Personally, I say it’s time for the Governator to say “Hasta la vista, deficiency judgement!”

(feel free to comment with your cheesiest Schwarzenegger-movie-line-infused idioms