Antideficiency Protections Under 580b, 580d, and 580e Amended and Clarified

  Antideficiency protections have been clarified by July 2013 legislation amending Code of Civil Procedure sections 580b and 580d. SB 426 amends those sections and clearly provides that the prohibitions contained in sections 580b and 580d include collecting or even owing a deficiency. The amendment further clarifies that the prohibition extends only to the borrower and the borrower’s non-encumbered assets — not to 1) guarantors, pledgors, or other sureties; or, 2) that might be satisfied from other collateral pledged to secure the obligation. Continue reading

Modification of Note Does Not Change Its Nature

  Code of Civil Procedure section 580b provides that no deficiency judgment shall lie after a sale of real property under a deed of trust given to the vendor to secure payment of the balance of the purchase price of that real property. Section 580b was drafted in contemplation of the standard purchase money transaction, in which the vendor of real property retains an interest in the land sold to secure payment of part of the purchase price.

  In Weinstein v. Rocha the court confirmed the breadth of section 580b. It held that a written settlement agreement, wherein the parties intended to modify the terms of a promissory note given to the seller to secure payment of part of the purchase price, was simply a modification of the note, not a separate obligation. The settlement agreement did not change the nature of the note — a seller financed note secured by a deed of trust.

  Seller’s remedy, therefore, was limited to foreclosure of the security. If that security is valueless by virtue of the foreclosure of a senior lien, section 580b applies and prevents any deficiency judgment on the note.

Anti-deficiency Statutes Summarized

  The increase in foreclosure and short sales in recent years has sparked some new legislation which expands California’s anti-deficiency laws. California’s present and impending anti-deficiency statutes, all contained in the Code of Civil Procedure, are summarized below. Continue reading