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Italicized text includes proposed additions to law or the previous version of the bill.
Struck text includes proposed deletions to law or the previous version of the bill.

(pdf version)
AMENDED IN SENATE MAY 16, 2011
AMENDED IN SENATE APRIL 4, 2011
AMENDED IN SENATE MARCH 21, 2011

INTRODUCED BY Senator Corbett
(Principal coauthors: Senators Correa and Vargas)
(Coauthors: Assembly Members Blumenfield and Skinner)

FEBRUARY 16, 2011

An act to amend Section 580e of the Code of Civil Procedure,
relating to mortgages, and declaring the urgency thereof, to take
effect immediately.



LEGISLATIVE COUNSEL'S DIGEST


SB 458, as amended, Corbett. Mortgages: deficiency judgments.
Existing law prohibits a deficiency judgment under a note secured
by a first deed of trust or first mortgage for a dwelling of not more
than 4 units in any case in which the trustor or mortgagor sells the
dwelling for less than the remaining amount of the indebtedness due
at the time of sale with the written consent of the holder of the
first deed of trust or first mortgage. Existing law provides that
written consent of the holder of the first deed of trust or first
mortgage to that sale shall obligate that holder to accept the sale
proceeds as full payment and to fully discharge the remaining amount
of the indebtedness on the first deed of trust or first mortgage.
Existing law specifies that those provisions would not limit the
ability of the holder of the first deed of trust or first mortgage to
seek damages and use existing rights and remedies against the
trustor or mortgagor or any 3rd party for fraud or waste if the
trustor or mortgagor commits either fraud with respect to the sale
of, or waste with respect to, the real property that secures that
deed of trust or mortgage. Existing law makes these provisions
inapplicable if the trustor or mortgagor is a corporation or
political subdivision of the state.
This bill would expand those provisions to prohibit a deficiency
judgment upon a note secured solely by a deed of trust or
mortgage for a dwelling of not more than 4 units in any case in which
the trustor or mortgagor sells the dwelling for a sale price less
than the remaining amount of the indebtedness outstanding at the time
of sale, in accordance with the written consent of the holder of the
deed of trust or mortgage if the title has been voluntarily
transferred to a buyer by grant deed or by other document that has
been recorded
and the proceeds of the sale are tendered as
agreed. The bill would also provide that, in other circumstances,
when the note is not secured solely by a deed of trust or mortgage
for a dwelling of not more than 4 units, no judgment shall be
rendered for any deficiency upon a note secured by a deed of trust or
mortgage for a dwelling of not more than 4 units, if the trustor or
mortgagor sells the dwelling for a sale price less than the remaining
amount of the indebtedness, in accordance with the written consent
of the holder of the deed of trust or mortgage
. The bill would
provide, following the sale, in accordance with the written
consent, the
voluntary transfer of title to a buyer, as
specified, and the tender of the sale proceeds, the rights, remedies,
and obligations of any holder, beneficiary, mortgagee, trustor,
mortgagor, obligor, obligee, or guarantor of the note, deed of trust,
or mortgage, and with respect to any other property that secures the
note, shall be treated and determined as if the dwelling had been
sold through foreclosure under a power of sale, as specified.
The bill would prohibit the holder of a note from requiring 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.
The bill would provide that
these provisions are inapplicable if the trustor or mortgagor is a
corporation, limited liability company, limited partnership, or
political subdivision of the state. The provisions would also be
inapplicable to any deed of trust, mortgage, or other lien given to
secure the payment of bonds or other evidence of indebtedness
authorized, or permitted to be issued, by the Commissioner of
Corporations, or that is made by a public utility subject to the
Public Utilities Act. The bill would provide that any purported
waiver of these provisions shall be void and against public policy.
This bill would declare that it is to take effect immediately as
an urgency statute.
Vote: 2/3. Appropriation: no. Fiscal committee: no. State-mandated
local program: no.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:

SECTION 1. Section 580e of the Code of Civil Procedure is amended
to read:
580e. (a) (1) No deficiency shall be
owed or collected, and no deficiency
judgment shall be
requested or
rendered for any deficiency upon a note secured
solely by a deed of trust or mortgage for a dwelling of
not more than four units, in any case in which the trustor or
mortgagor sells the dwelling for a sale price less than the remaining
amount of the indebtedness outstanding at the time of sale, in
accordance with the written consent of the holder of the deed of
trust or mortgage. mortgage, provided that
both of the following have occurred:

(A) Title has been the voluntarily transferred to a buyer by grant
deed or by other document of conveyance that has been recorded in
the county where all or part of the real property is located.


(B) The proceeds of the sale have been tendered to the mortgagee,
beneficiary, or the agent of the mortgagee or beneficiary, in
accordance with the parties' agreement.

(b) Following the

(2) In circumstances not described in
paragraph (1), when a note is not secured solely by a deed of trust
or mortgage for a dwelling of not more than four units, no judgment
shall be rendered for any deficiency upon a note secured by a deed of
trust or mortgage for a dwelling of not more than four units, if the
trustor or mortgagor sells the dwelling for a sale price less than
the remaining amount of the indebtedness outstanding at the time of
sale, in accordance with the written consent of the holder of the
deed of trust or mortgage. Following the sale, in accordance with the
holder's written consent, the
voluntary transfer of title to a
buyer by grant deed or by other document of conveyance recorded in
the county where all or part of the real property is located ,
and the tender to the mortgagee, beneficiary, or the agent of
the mortgagee or beneficiary of the sale proceeds, as agreed, the
rights, remedies, and obligations of any holder, beneficiary,
mortgagee, trustor, mortgagor, obligor, obligee, or guarantor of the
note, deed of trust, or mortgage, and with respect to any other
property that secures the note, shall be treated and determined as if
the dwelling had been sold through foreclosure under a power of sale
contained in the deed of trust or mortgage for a price equal to the
sale proceeds received by the holder, in the manner contemplated by
Section 580d.
(b) 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) If the trustor or mortgagor commits either fraud with respect
to the sale of, or waste with respect to, the real property that
secures the deed of trust or mortgage, this section shall not limit
the ability of the holder of the deed of trust or mortgage to seek
damages and use existing rights and remedies against the trustor or
mortgagor or any third party for fraud or waste.
(d) (1) This section shall not apply if the
trustor or mortgagor is a corporation, limited liability company,
limited partnership, or political subdivision of the state.
(e)

(2) This section shall not apply to any deed of trust,
mortgage, or other lien given to secure the payment of bonds or other
evidence of indebtedness authorized, or permitted to be issued, by
the Commissioner of Corporations, or that is made by a public utility
subject to the Public Utilities Act (Part 1 (commencing with Section
201) of Division 1 of the Public Utilities Code).
(f)

(e) Any purported waiver of subdivision (a) or (b)
shall be void and against public policy.
SEC. 2. This act is an urgency statute necessary for the immediate
preservation of the public peace, health, or safety within the
meaning of Article IV of the Constitution and shall go into immediate
effect. The facts constituting the necessity are:
In order to mitigate the impact of the ongoing foreclosure crisis
and to encourage the approval of short sales as an alternative to
foreclosure, it is necessary that this act take effect immediately.