As a general rule, a mortgage lender is prohibited from pursuing a short sale deficiency or deficiency judgment resulting from a short sale on residential 1-to-4 unit properties. Where applicable, a mortgage lender involved in a short sale is prohibited from engaging in any of the following acts:

• Collecting a deficiency
• Having a borrower owe a deficiency
• Requesting a deficiency judgment
• Having a court render a deficiency judgment or
• Requiring the borrower to pay any additional compensation, aside from the proceeds of the short sale, in exchange for approval of the short sale
•  A borrower is protected under this law if all of the following requirements are met, and no exception applies:
• Mortgage loan is solely secured by a deed of trust
• Mortgage loan is for a 1-to-4 residential units property
• Borrower sells for less than the outstanding loan balance owed
• Lender provides a written short sale approval
• Title voluntarily transfers to a buyer by grant deed or other conveyance document recorded in the county where the property is located
• Proceeds of the sale have been tendered to the lender or the lender’s agent in accordance with the parties’ agreement.

The full text of Senate Bill 458 is available at www.leginfo.ca.com