If you are considering a short sale of your home (or have completed a short sale), there is a recent California Supreme Court opinion that you should review.
The gist is that a bank can’t collect a deficiency judgment when it agrees to a short sale in lieu of foreclosure. Banks can’t agree to a short sale to a third party, then seek the difference of the balance of the loan and the amount of the short sale. The rule had been that banks can’t generally collect a deficiency judgment when it forecloses on a homeowner, and this opinion extends that debt protection to homeowners that agreed to a short sale.
JP Morgan Chase Bank had been wrongly trying to squeeze homeowners who unfortunately were in a position to agree to a short sale of their homes. The Plaintiff in this case bought a condo in 2004 and fell behind with payments in 2010. Chase pushed her into a short sale then tried to collect a debt on the difference between the amount owed on the mortgage and the short sale. If you know anyone who was unfairly squeezed—by an attempt to collect on the difference between the short sale amount and the loan balance by letter or other communication; or someone that actually did pay some or all of the deficiency –you should seek the advice of an attorney.
Here is a link to the full opinion of the court.
Thank you to Derek Wilson of Pettit Kohn Ingrassia & Lutz PC for this information.
Derek Wilson (858) 509-5679 or firstname.lastname@example.org