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

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

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

FEBRUARY 16, 2011

An act to amend Section 580b 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 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. The bill would provide, following 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 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.

Existing law prohibits a deficiency judgment upon a sale of real
property or an estate for years for failure of the purchaser to
complete the contract of sale or satisfy the obligation underlying a
mortgage or trust deed given to secure payment in specific
circumstances, including if the loan was on a dwelling, as specified,
and the loan was, in fact, used to pay all or part of the purchase
price of the dwelling.

This bill would provide that a loan used to pay all or part of the
purchase price of real property or an estate for years includes a
subsequent loan, mortgage, or deed of trust that refinances or
modifies the original loan, but only to the extent that the
subsequent loan, mortgage, or deed of trust was acquisition
indebtedness, as defined.

Vote: majority 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) No judgment shall be rendered for any deficiency
under upon a note secured by a
first
deed of trust or first 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 due
outstanding at the time of sale , in
accordance
with the written consent of the holder of the
first deed of trust or first
mortgage. 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.

(b) Following 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)

(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 first deed of trust or
first mortgage, this section shall 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 third
party for fraud or waste.
(c)

(d) 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) 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) 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.

SECTION 1.
Section 580b of the Code of Civil
Procedure is amended to read:
580b. A deficiency judgment shall not lie in any event after a
sale of real property or an estate for years therein for failure of
the purchaser to complete his or her contract of sale, or under a
deed of trust or mortgage given to the vendor to secure payment of
the balance of the purchase price of that real property or estate for
years therein, or under a deed of trust or mortgage on a dwelling
for not more than four families given to a lender to secure repayment
of a loan that was in fact used to pay all or part of the purchase
price of that dwelling occupied, entirely or in part, by the
purchaser.
If both a chattel mortgage and a deed of trust or mortgage have
been given to secure payment of the balance of the combined purchase
price of both real and personal property, a deficiency judgment shall
not lie at any time under any one thereof if no deficiency judgment
would not lie under the deed of trust or mortgage on the real
property or estate for years therein.
For purposes of this section, a loan used to pay all or part of
the purchase price of real property or an estate for years shall
include any subsequent loan, mortgage, or deed of trust that
refinances or modifies the original loan, but only to the extent that
the subsequent loan, mortgage, or deed of trust is acquisition
indebtedness as defined in Section 163(h)(3)(B) of Title 26 of the
United States Code.