In a case of first impression, the Fourth Appellate District in Coker v. JP Morgan Chase Bank, holds that the antideficiency protections of Code of Civil Procedure section 580b apply to any loan used to purchase residential real property, commonly referred to as a “purchase money loan,” regardless of the mode of sale.
Section 580b provides in substance: No deficiency judgment shall lie in any event after a sale of real property for failure of the purchaser to complete his or her contract of sale under a deed of trust or mortgage on a dwelling given to a lender to secure repayment of a loan which was in fact used to pay all or part of the purchase price of that dwelling.
The court specifically held the protections apply in a nonjudicial foreclosure, a judicial foreclosure, and a short sale. The plain language of section 580b prohibits a deficiency judgment following any sale of the property. “No deficiency judgment shall lie in any event . . . after a sale of real property.” There is no language modifying the term “sale” and the phrase “in any event” further indicates that the protections of 580b apply to all sales. Section 580b focuses on the type of loan, i.e., purchase money, not on the mode of sale.
Purchase money loans are non-recourse. The borrower has no personal liability on the note. The lender’s sole recourse is against the security. The deficiency protections of 580b cannot be waived. It therefore does not matter that a borrower agrees to be liable for any deficiency after a short sale because a deficiency judgment is prohibited by section 580b.
I consult with clients and accept cases concerning foreclosures, short sales, and deficiency judgments, including cases involving purchase money loans and the antideficiency protections of Code of Civil Procedure sections 580b, 580d, and 580e. For other types of cases I accept, please scroll my Home and My Practice pages. If you are seeking a legal consultation or representation, please give me a call at 818.971.9409. – Michael Daymude