Mortgage Daily Logo

Realtors Seek to Block Lenders from Collecting Deficiencies on Refis

Mortgage News

Realtors in California are sponsoring legislation that would prohibit mortgage lenders in that state from collecting deficiency balances on refinanced loans that have been foreclosed.

The California Association of Realtors announced today its sponsorship of SB 1178.

According to the Los Angeles-based association, legislation already in place since the 1930s has prohibited the collection of deficiency balances if the foreclosed loan was used to purchase the property. But “critical legal protections” are lost by borrowers who refinance their original purchase-money loans, and they could be personally liable for the difference between the foreclosed home’s sales price and the mortgage balance.

The legislation would extend anti-deficiency protection for borrowers who have refinanced their original mortgages but now face foreclosure.

“The people that really need protection are the folks who refinanced in 2005 and didn’t know its effect, not the folks who will get loans next year,” the announcement said.

Despite lenders’ efforts to exclude the cashout portion of refinanced mortgages, C.A.R. “staunchly” and successfully opposed such a measure. The group said that the lenders’ position didn’t factor in cashout loans where the proceeds were used to improve the property.

C.A.R. said, “Current events demonstrate there has been no shortage of inadequate underwriting by mortgage lenders, the banking industry and others preying on unsuspecting and uninformed consumers.”

The group warned that letting lenders consider borrowers’ other assets in their lending decisions “erodes their incentive to make certain that the loan ‘pencils out’ and has adequate security.”

Related Posts

Centex Home Equity Announces Name and Brand Change to National Mortgage, LLC

Third-Quarter 2012 Mortgage Litigation Index

Lawsuits involving excessive fees, servicing fees and loan fees beyond state maximums. Defendant Plaintiff Court Amount Overview Case Title Case Number Date Filed Date of Activity Link to Story Fannie Mae and Freddie Mac Orangeburg County, Richland County, South...

Centex Home Equity Announces Name and Brand Change to National Mortgage, LLC

Net Branch Lawsuits

Litigation involving net branch operations. Defendant Plaintiff Court Amount Overview Case Title Case Number Date Filed Date of Activity Link to Story PHH Mortgage Corp. Mathews Supreme Court of Virginia na Court held that the term "branch office" includes not only...

Centex Home Equity Announces Name and Brand Change to National Mortgage, LLC

Whistleblower Lawsuits

Litigation related to loan servicing, including escrow issues, transfer of servicing and servicing borrowers in bankruptcy and foreclosure.   Defendant Plaintiff Court Amount Overview Case Title Case Number Date Filed Date of Activity Link to Story Bank of...

Popular posts

How Long Does It Take to Refinance a Mortgage
How Long Does It Take to Refinance a Mortgage

So, you’re interested in refinancing your mortgage. Maybe you want some extra capital to do that home project you’ve always dreamed of, interest rates are nearing record lows, or you want to start consolidating debt. Regardless of the motivation behind the refinance,...

How Does Refinancing a Mortgage Work
How Does Refinancing a Mortgage Work

A home purchase is considered an investment, and a robust one at that. Savvy owners are constantly looking for new ways to reduce debt, save money, pay less in interest, and ultimately build equity. Refinancing is one way to leverage your investment and do just that....

What Does It Mean to Refinance Your Home
What Does It Mean to Refinance Your Home

You can think of refinancing your mortgage as a debt redo. Essentially, you’ll swap out the existing loan for a new one - ideally with better terms and conditions. Only this time it could help you save money on high mortgage payments, rather than just borrow it....

Setting up the Utilities in My New House
Setting up the Utilities in My New House

All the tedious, time-consuming paperwork has been signed, sealed, and delivered. Your belongings are packed into what seems like a million boxes and you have a solid plan to haul all your existing furniture to the new place. Just as your boxes and furniture need to...

When Is My First Mortgage Payment Due?
When Is My First Mortgage Payment Due?

Navigating your way through a brand-new mortgage loan can be a difficult task, especially for first-time homeowners.   After handing over a large sum of money for the down payment and closing costs, it’s important to pay attention to the timing of your first...

Newsletter

Don’t worry, we don’t spam