Reviewing the Anti-Deficiency Rules

I was reading an article today about the Heritage Financial litigation that has been going on the past few years – until Heritage filed chapter 7 in Texas.  I want to remind myself of the existing anti-deficiency rules in California and the anti-fraud rules.

C.C.P. § 726(g)

(g) [the right of a lender to sue for fraud] does not apply to loans secured by single-family, owner-occupied residential real property, when the property is actually occupied by the borrower as represented to the lender in order to obtain the loan and the loan is for an amount of one hundred fifty thousand dollars ($150,000) or less, as adjusted annually, commencing on January 1, 1987, to the Consumer Price Index as published by the United States Department of Labor.

The anti-deficiency rules apply to 1) land-sale contracts, 2) purchase money loans from the seller of the property, 3) purchase money loans from lenders on SFR or less than 4 units including refis of those loans.

C.C.P. § 580b.
(a) Except as provided in subdivision (c), no deficiency shall be owed or collected, and no deficiency judgment shall lie, for any of the following:
(1) . . . failure of the purchaser to complete his or her contract of sale.
(2) Under a deed of trust . . . given to the [seller] to secure payment of the balance of the purchase price of that real property. . ..
(3) Under a deed of trust . . . on a dwelling for not more than four families given to a lender to secure repayment of a loan that was used to pay all or part of the purchase price of that dwelling, occupied entirely or in part by the purchaser. For purposes of subdivision (b), a loan described in this paragraph is a “purchase money loan.”
(b) No deficiency shall be owed or collected, and no deficiency judgment shall lie, on a loan, refinance, or other credit transaction (collectively, a “credit transaction”) that is used to refinance a purchase money loan, or subsequent refinances of a purchase money loan, except to the extent that in a credit transaction the lender or creditor advances new principal (hereafter “new advance”) that is not applied to an obligation owed or to be owed under the purchase money loan, or to fees, costs, or related expenses of the credit transaction.  A new credit transaction shall be deemed to be a purchase money loan except as to the principal amount of a new advance.  For purposes of this section, any payment of principal shall be deemed to be applied first to the principal balance of the purchase money loan, and then to the principal balance of a new advance, and interest payments shall be applied to any interest due and owing.  This subdivision applies only to credit transactions that are executed on or after January 1, 2013.
(c) The fact that no deficiency shall be owed or collected under the circumstances set forth in subdivisions (a) and (b) does not affect the liability that a guarantor, pledgor, or other surety might otherwise have with respect to the deficiency, or that might otherwise be satisfied in whole or in part from other collateral pledged to secure the obligation that is the subject of the deficiency.
(d) When both a chattel mortgage and a deed of trust or mortgage have been given to secure payment of the balance of the combined purchase price of both real and personal property, no deficiency judgment shall lie under any one thereof if no deficiency judgment would lie under the deed of trust or mortgage on the real property or estate for years therein.

If the same lender holds both the senior and junior loan, the lender cannot pursue a personal judgment against you for the junior loan after foreclosing on the senior loan. (need cite)

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