California's Anti-Deficiency Laws - a brief refresher

What is the anti-deficiency statute?  It is California Code of Civil Procedure Section 580(b).

The code states in relevant part:

"No deficiency judgment shall lie in any event after a sale of real property or an estate for years therein for failure of the purchaser to complete his or her contract of sale, or under a deed of trust or mortgage given to the vendor to secure payment of the balance of the purchase price of that real property or estate for years therein, or under a deed of trust or mortgage on a dwelling for
not more than four families 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 occupied, entirely or in part, by the purchaser."

In plain English - the statute addresses 2 types of loans:

1) purchase money loans and

2) seller carryback loans.

Under the statute, seller carryback loans are not entitled to seek a deficiency judgment against the borrower.  However, there is an exception under California's stare decisis (case law) that does permit the seller to recover against the borrower under certain circumstances.

As for the purchase money loans - no deficiency if it is owner-occupied, residential one to four.  What does that exclude? vacation homes, home-equity lines of credit (HELOC), investment properties where the borrower does not reside there, apartment buildings more than 4 units.

These loans are commonly referred to as "non-recourse" loans because lenders on these types of loan know their only recourse is the security (collateral).

DISCLAIMER: THIS IS NOT INTENDED TO BE A PRIMER ON HOW TO AVOID YOUR DEBTS AND LOAN LIABILITY.  CONSULT WITH A BANKRUPTCY SPECIALIST AND TAX ADVISER.  Please do not email or call me for tax advice.  I am not an accountant or tax professional. 

Comments

[Steve B.]

Assuming the first deed and Home Equity line of credit are with the same lender, but the HELOC was taken out at a different time, what ways can debtor be protected from lender coming after him for the HELOC after lender forecloses on the first?

[Steve B.]

Assuming the first deed and Home Equity line of credit are with the same lender, but the HELOC was taken out at a different time, what ways can debtor be protected from lender coming after him for the HELOC after lender forecloses on the first?

[shannon alton]

Pertaining to deficiency judgments: My HELOC (open end deed of trust) was used as original purchase money only and not as a line of credit. Does the State’s Anti Deficiency Law pertain to it and is it considered 'nonrecourse'?

[michelle]

in seller carry back as first position and home equitey line as 2nd, is foreclosure process 90 days? how long do I have in my house once I have been served a nod?