Legal Update

AFTER JANUARY 1, 2013, HOMEOWNERS WHO REFINANCE PURCHASE MONEY LOANS AND THEN DEFAULT, WILL RETAIN ANTI-DEFICIENCY PROTECTION FOLLOWING FORECLOSURE

  • September 17th, 2012
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SB 1069 amends California Code of Civil Procedure Section 580b to allow a homeowner to refinance a purchase money loan and maintain protection from personal liability for the unpaid balance of the loan if the homeowner defaults.

Existing law provides that no deficiency judgment shall lie following a judicial foreclosure of a deed of trust on an owner-occupied dwelling (1-4 units) securing repayment of a purchase money loan that was used to purchase that dwelling.  Prior to SB 1069, this protection was usually lost when the loan was refinanced.

SB 1069 provides that no deficiency judgment shall lie on any loan that is used to refinance a purchase money loan, or subsequent refinances of a purchase money loan, except to the extent that the lender advances new principal which is not applied to any obligation owed under the purchase money loan, or to fees, costs, or related expenses of the refinance.

The new law will only apply to loan transactions that are executed on or after January 1, 2013.  It will not apply to previously refinanced loans.

Full text of the amended law:   http://leginfo.legislature.ca.gov/faces/billNavClient.xhtml?bill_id=201120120SB1069