Here in California, we are protected on our Purchase Money Loans for 1-4 residential units whether the anti-deficiency law expires or not. We have been for years..A borrower who defaults on his home relinquishes his home. But..that old refinance or HELOC (home equity line of credit) is protected from pursuit only through 12/31/2012. What?
When you do a Short Sale or if you lose your home to Foreclosure, you as the borrower are protected through the end of the year from your Lenders pursuing you for the deficiency..the difference between what the property sold for and what you owed on your note (s).
I have found that with the protection in place, borrowers have been more willing to do a Short Sale. This is a good thing! Borrowers that short sale vs. those that foreclose, keep their HOA dues up (most of them), keep utilities on, and most often stay in the home until it closes. The home isn’t vacant and therefore squatters don’t move in and the neighborhood isn’t hit as hard.
If the deficiency protection is allowed to expire, I believe we will see the numbers of “strategic Defaults” increase once again..why not? Doesn’t make sense to keep pouring money into a black hole, and even less sense to short sale it if the Lenders are coming after you anyway. At least, they retain the right to.
Keep the anti-deficiency law in place. It’s helping. Short Sales are better than foreclosures for neighborhoods. That helps more than anything else.