A few months ago, just when doing a short sale was getting a little more organized, SB458 was voted on and passed.  You may need to read my post just previous to this one wherein I predicted issues regarding SB458. 

To recap, SB458 is Senate Bill 458 and seemingly, but not in reality, it was designed to help borrowers complete short sales on their homes and come out of it without owing any remaining deficit to either the First or Second mortgage, or Equity line holders. Unfortunately, the outcome of this Bill, because it did not address deficits should the home owner be foreclosed on, allows the Second mortgage and/or Equity line holders to ask for so many dollars during the short sale that the First mortgage holder could not possibly agree, whereby forcing the home into foreclosure!  In reality, this is the result the Second mortgage and/or Equity line holders want.  This way, they can make agreements with the borrower to have their debt paid in full, if so desired.  And, why wouldn’t they want this?  So, in reality, the SB458 is having the exact opposite effect that was intended.

First some good news:  It’s my understanding, though not confirmed yet, that SB458 will be edited, hopefully, as soon as the end of September.  Probably before lots of people called in, I was originally told it could be the end of the year before it is edited.  Honestly, I don’t care how long it takes as long as Governor Brown freezes foreclosures until SB458 is edited appropriately.

It’s my guess that SB458′s edit will include some protection for those that will be or have been foreclosed on and it will be retro-active similarly to the original writing of SB458; and, the edit will encourage the banks’ work together to make short sales happen, and happen more quickly. Somehow, everyone is going to have to come to agreement on some percentage, I say 10%, that the First Mortgage will set aside for the Second or Equity Line.

Now the bad:  As I see it, if foreclosures are not frozen and homes do foreclose between now and the edit, borrowers may have to hire attorneys to go against the Banks that rushed the foreclosure to beat the edit.  Attorneys may also be required to adjust borrowers’ credit to show the sale as a short sale in lieu of foreclosure.  First mortgage holders will be out additional funds it costs to do a foreclosure in lieu of a short sale, and those banks could even go after the other banks for reimbursement.  The Realtors caught in the middle who have listed the home, sometimes for years at a time, will not be paid for work performed to save the Borrowers; and as what probably happens all the time, the Realtors with the Buyer can go directly to the bank with that ready, willing and able buyer and help them purchase the home directly from the bank, cutting out the Realtor that did all the work.

I wonder if the Government recognizes that short sales are already being halted on homes that were already approved by its lien holders because of omissions made on SB458 now giving lien holders the right to pursue their debt by way of a foreclosure?

The saddest part of all of this, as the negotiator put it at USAA, is that Veterans, who have already been through enough, are now losing their homes, their credit, and therefore, as I understand it, their ability to achieve security clearances.  In addition, all those buyers, Buyers’ Agents and Listing Agents currently waiting on a short sale to be approved are waisting their time.  At this point, it’s doubtful they will close unless their chosen property only has one loan, or possibly if both loans are at the same bank.  And, just when we don’t need it, more foreclosures will lead to BIG price reductions and contribute to a further weakening of our economy.

We can avoid all of this IF Governor Brown would Freeze Foreclosures until this issue is settled.  This needs to happen today!  Please help me get the word to Governor Brown. It’s very important we get this message in front of Governor Brown today!

To discuss this further, do not hesitate to comment, or contact me at 949-929-6343. To see how I work visit my website by clicking here.