Less Liability for You in California Shorts

No, I'm not referring to any form of fashion. I'm talking about the removal from further liability to any individual in California when selling their home in a short sale. Usually done to avoid the loss of a home by foreclosure, short sales occur when a homeowner sells the home for a price lower than the outstanding principal balance of their mortgage. Don't get the idea that doing a short sale is a wonderful thing--it isn't. Your credit still gets trashed, although possibly not quite as much as in a foreclosure. You may very possibly find yourself owing a possibly substantial sum in income taxes to both the Feds and the state (how much, if any, depending on your particular situation--check with your accountant). But, if you do a short sale, you at least avoid foreclosure and your mortgage travails are over. At least that's what you expect to be the situation when it's completed.
However, in an increasing number of cases, the banks holding your mortgage have been requiring you, the selling homeowner, to agree to pay a deficiency payment, or acknowledging that they may retain the right to sue you for a deficiency after the short has concluded. A deficiency is the amount left unpaid and supposedly forgiven by the bank that makes your transaction a short sale.
Well, under a new law taking effect today, Californians are no longer liable for a deficiency judgment in the short sale of their homes. Passed as California Senate Bill 458, the law prohibits any deficiency judgment in short sales of residential properties, one to four units, and also precludes ANY lender (regardless if it's your first mortgage or your fifteenth) requesting you to agree to make any form of deficiency payment or judgment after the conclusion of your short sale. The law says that any such payment shall be void as against public policy. What that fancy bit of lawyer language means is that the law regards such payments as harmful to the general public, and thus not permitted. This law doesn't,however, prohibit borrowers from offering a payment as an inducement to the lender to approve a short sale. It also doesn't protect the homeowner in cases of his/her fraud or waste to the property, or where the homeowner isn't a natural person or has cross-collateralized the mortgage with more than one property.
If you're considering doing a short sale, definitely check with your attorney to be certain if you qualify for this new protection. Like I said at the start, it's not a wonderful thing, but it's a hell of a lot better than a foreclosure--and a hell of a lot better than it was as recently as yesterday.
Good luck.