CA Foreclosure Law - Code of Civil Procedure 580
580. (a) The relief granted to the plaintiff, if there is no answer, cannot exceed that demanded in the complaint, in the statement required by Section 425.11, or in the statement provided for by Section 425.115; but in any other case, the court may grant the plaintiff any relief consistent with the case made by the complaint and embraced within the issue. The court may impose liability, regardless of whether the theory upon which liability is sought to be imposed involves legal or equitable principles.
(b) Notwithstanding subdivision (a), the following types of relief may not be granted in a limited civil case:
(1) Relief exceeding the maximum amount in controversy for a limited civil case as provided in Section 85, exclusive of attorney's fees, interest, and costs.
(2) A permanent injunction, except as otherwise authorized by statute.
(3) A determination of title to real property.
(4) Declaratory relief, except as authorized by Section 86.
580a.
Whenever a money judgment is sought for the balance due upon
an obligation for the payment of which a deed of trust or mortgage
with power of sale upon real property or any interest therein was
given as security, following the exercise of the power of sale in
such deed of trust or mortgage, the plaintiff shall set forth in his
or her complaint the entire amount of the indebtedness which was
secured by the deed of trust or mortgage at the time of sale, the
amount for which the real property or interest therein was sold and
the fair market value thereof at the date of sale and the date of
that sale. Upon the application of either party made at least 10
days before the time of trial the court shall, and upon its own
motion the court at any time may, appoint one of the probate referees
provided for by law to appraise the property or the interest therein
sold as of the time of sale. The referee shall file his or her
appraisal with the clerk and that appraisal shall be admissible in
evidence. The referee shall take and subscribe an oath to be
attached to the appraisal that he or she has truly, honestly and
impartially appraised the property to the best of his or her
knowledge and ability. Any referee so appointed may be called and
examined as a witness by any party or by the court itself. The court
must fix the compensation of the referee in an amount as determined
by the court to be reasonable, but those fees shall not exceed
similar fees for similar services in the community where the services
are rendered, which may be taxed and allowed in like manner as other
costs. Before rendering any judgment the court shall find the fair
market value of the real property, or interest therein sold, at the
time of sale. The court may render judgment for not more than the
amount by which the entire amount of the indebtedness due at the time
of sale exceeded the fair market value of the real property or
interest therein sold at the time of sale with interest thereon from
the date of the sale; provided, however, that in no event shall the
amount of the judgment, exclusive of interest after the date of sale,
exceed the difference between the amount for which the property was
sold and the entire amount of the indebtedness secured by the deed of
trust or mortgage. Any such action must be brought within three
months of the time of sale under the deed of trust or mortgage. No
judgment shall be rendered in any such action until the real property
or interest therein has first been sold pursuant to the terms of the
deed of trust or mortgage, unless the real property or interest
therein has become valueless.
580b.
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.
Where 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 at any time 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.
580c.
In all cases where existing deeds of trust or mortgages are
judicially foreclosed, unless a different amount is set up in the
mortgage or deed of trust, and in all cases of mortgages and deeds of
trust executed after this act takes effect, the mortgagor or trustor
may be required to pay only such amount as trustee's or attorney's
fees for processing the judicial foreclosure as the court may find
reasonable and also the actual cost of publishing, recording, mailing
and posting notices, litigation guarantee, and litigation cost of
suit.
580d.
No judgment shall be rendered for any deficiency upon a note
secured by a deed of trust or mortgage upon real property or an
estate for years therein hereafter executed in any case in which the
real property or estate for years therein has been sold by the
mortgagee or trustee under power of sale contained in the mortgage or
deed of trust.
This section does not apply to any deed of trust, mortgage or other lien given to secure the payment of bonds or other evidences of indebtedness authorized or permitted to be issued by the Commissioner of Corporations, or which is made by a public utility subject to the Public Utilities Act (Part 1 (commencing with Section 201) of Division 1 of the Public Utilities Code).
580.5.
(a) For purposes of this section:
(1) "Beneficiary" means a "beneficiary" as defined in paragraph (3) of subdivision (a) of Section 5102 of the Commercial Code.
(2) "Issuer" means an "issuer" as defined in paragraph (9) of subdivision (a) of Section 5102 of the Commercial Code.
(3) "Letter of credit" means a "letter of credit" as defined in paragraph (10) of subdivision (a) of Section 5102 of the Commercial Code whether or not the engagement is governed by Division 5 (commencing with Section 5101) of the Commercial Code.
(b) With respect to an obligation which is secured by a mortgage or a deed of trust upon real property or an estate for years therein and which is also supported by a letter of credit, neither the presentment, receipt of payment, or enforcement of a draft or demand for payment under the letter of credit by the beneficiary of the letter of credit nor the honor or payment of, or the demand for reimbursement, receipt of reimbursement or enforcement of any contractual, statutory or other reimbursement obligation relating to, the letter of credit by the issuer of the letter of credit shall, whether done before or after the judicial or nonjudicial foreclosure of the mortgage or deed of trust or conveyance in lieu thereof, constitute any of the following:
(1) An action within the meaning of subdivision (a) of Section 726, or a failure to comply with any other statutory or judicial requirement to proceed first against security.
(2) A money judgment for a deficiency or a deficiency judgment within the meaning of Section 580a, 580b, or 580d, or subdivision (b) of Section 726, or the functional equivalent of any such judgment.
(3) A violation of Section 580a, 580b, 580d, or 726.
580.7.
(a) For purposes of this section:
(1) "Beneficiary" means a "beneficiary" as defined in paragraph (3) of subdivision (a) of Section 5102 of the Commercial Code.
(2) "Customer" means an "applicant" as defined in paragraph (2) of subdivision (a) of Section 5102 of the Commercial Code.
(3) "Letter of credit" means a "letter of credit" as defined in paragraph (10) of subdivision (a) of Section 5102 of the Commercial Code whether or not the engagement is governed by Division 5 (commencing with Section 5101) of the Commercial Code.
(b) No letter of credit shall be enforceable by any party thereto in a loan transaction in which all of the following circumstances exist:
(1) The customer is a natural person. (2) The letter of credit is issued to the beneficiary to avoid a default of the existing loan.
(3) The existing loan is secured by a purchase money deed of trust or purchase money mortgage on real property containing one to four residential units, at least one of which is owned and occupied, or was intended at the time the existing loan was made, to be occupied by the customer.
(4) The letter of credit is issued after the effective date of this section.
As of May 1, 2007
Comments
I'm 180K upside down on my home. I see people moving in a one fourth the cost. HOA and Taxes are killing me! I see no way out and I'm ready to walk. Can the bank come after me?
I'm am upside down on my condo, and I am also ready to walk as so many others. I worked hard put down 20% and had to move out. I turned it into a rental and that is just not working out..I am trying to work with the banks but if I walk can the banks or HOA garnish my wages? Either before or after a short sale or if I walk??
Hi Stephen,
The laws vary from state to state regarding deficiency judgements. Assuming you are in CA (this question is being posed under the CA Foreclosure Law section of our site) there would be a couple of things to consider. Also assuming that you have only one loan and it is a purchase money loan (you have not refinanced the property or taken out a second) then the lender could not seek a deficiency if they foreclosed on the 1st or if they approved a short sale.
Past due HOA dues are usually wiped out at trustee sale or paid through escrow on a short sale. If the lender forecloses and the HOA dues are wiped out the HOA could pursue you for collection of those dues by taking you to small claims court and seeking a judgment. To the best of my knowledge they would not be able to garnish wages for any judgment that was entered.
What is the soonest after my foreclosed home sells at a public sale/auction do i need to be packed and moved out? I have heard as quick as a 72h notice will be given. Thanks
Hi Jennifer,
If you are the former owner then the bank (or investor that purchased at trustee sale) would only need to give you a 3 day notice. If you do not move after that notice expires they would be forced to evict you. Oftentimes the lender/investor will make contact with the occupants and attempt to negotiate with you. They MAY offer a cash for keys incentive to be out by a certain date. Provided you leave the property in good condition they would give you the cash at close for the keys. It is certainly better for all parties to come to an agreement and avoid an eviction.
What is the soonest after my foreclosed home sells at a public sale/auction do i need to be packed and moved out? I have heard as quick as a 72h notice will be given. Thanks
on the first mortgage iowe135g,on the second i owe 57g the house is valued at 80g tried working with the bank with no results what would happen if i just walked away i am 68 yearsold with social sec,pension can the bank come after me for the unpaid amount
Hi Diana,
It would depend on which lender foreclosed and if the loans were purchase money loans. If these loans were both used to purchase the property then there is no recourse and you could walk away. Keep in mind that there could be tax consequences and you would want to consult with a tax professional. If the 1st foreclosed and the 2nd was NOT a purchase money loan then that lender COULD pursue collection as a now non-secured loan. Before you make a decision you should consult with someone that can look at your specific situation and answer all of your questions.
I had a an original first ARM on my house with a balance of $45k and a HELOC of $275k. I refinaned in to a new single 30 yr. fixed loan for $280k with a $40k paydown on close of escrow. Later, due to other problems, I had to let the house go. The bank agreed to a short sale and I found a cash buyer who offered $190k and the bank accepted. As this is a single first loan replacing the origanal first and second, does the bank have the right to go after me for a deficiency judgement? If so, for how long? I received a 1099 from the bank for $110k which included the deficent loan amount, fees and interest. This was in CA and the short sale closed June of 2010. How soon can I look to refi my other home?
what liability does a person have for deficiency judgements in the event of a foreclosure on an investment propoerty in California? I know someone who owned a tri-plex that was foreclosed upon. She did not live there but her sister did. The lender foreclosed, sold the property for 1/3 of the loan amount, and is now harassing her for the balance. All of the original loan was used to purchase the propoerty (and only to purchase the property). Does she have to worry about a deficiency judgment?
Hi Tom,
If the lender chose to foreclose using the non-judicial foreclosure process then this would fall under the "one action rule". This means that the lender has taken their "one action" by foreclosing on the property and cannot pursue any type of deficiency. (regardless of occupancy or whether or not it was a purchase money loan). There is one exception and that has to do with bad faith waste or fraud. As an example, if you dumped cement down the drain pipes or lied on the loan application then they could pursue a deficiency judgment.
I am in escrow with a short sale and the second lender is offered 5% of amount owed by the first lender. They want 10% though and pressure me as the buyer to pay the difference. My agent says that the 2nd lender claims that since the new law came into effect ,they can sell the loan on the free market and receive 30% . Is this correct?
Hi Henny,
Under a new law that was passed in July a lender on a second that approves a short sale must give a full satisfaction release. This has now caused many lenders to refuse to approve a short sale if they feel they can potentially collect more after the 1st forecloses. I have not heard the 30% amount and it sounds a bit high to me. Keep in mind that many of these seconds have already been sold to collection agencies and that is actually who you are negotiating with on these short sale. At the end of the day it all depends on what the home is worth to you. I personally purchase a short sale in 1996 and had to pay the 2nd a lump sum to get them to sign off on the short sale. Although I was advised against this by most of my peers it was worth it to me to pay the money and get the house. Keep in mind that the lender on the 1st will have to approve any additional monies going to the 2nd. This could be a deal killer. Just make sure you do not do anything shady like paying money outside of escrow.
Are there any different regulations under a government backed loan.
I currently have just a 1st with Cal HFA. I tried and tried the short sale route, but it appears that because Cal HFA sells there loans to a private bond, its a harder process to approve the short sale.
My concerns are, if foreclosure occurs, what can Cal HFA do differently, if anything.
Any help would be much appreciated.
Hi Dave,
The non-judicial foreclosure process is the same for all loan types. You would want to consult with your loan counselor for details. If I remember correctly some of the government backed loans allow for collection on damages. I recall a story where the homeowner left the property and put cement down the drains. Because his loan was a government backed loan they came after him for the damages to the property.
I was under the impression that current case law holds that if a loan is refinanced only for the existing balance ( no cash out, no increase in the existing loan amount) and it was funded by the same lender who issued the original purchase money loan, the 580b protections still apply. I bring all of this up because I am currently considering refinancing, but have limited by choice to my existing lender for the reasons stated above.
I am also curious as to how the 580b provision would apply to natural disasters. For example, if an earthquake completely destroyed a home, can the borrower walk away and have the lender foreclose on the destroyed property, and not face the threat of a deficiency judgement? I wonder if the lender would avoid a foreclosure all together in this situation and seek a deficiency judgement as their one action.
Hi Jerome,
In CA we have what is called the "one action rule". If the bank forecloses on your first mortgage (regardless if it is a purchase money or cash out refi) then they have taken their "one action" and cannot pursue a deficiency judgment on that loan.
In 2006 my wife and I purchased a condo. The condo was in both of our names but the loan was in her name. There was a first of 260k and a second for 68k. In 2008 I lost my job and we were unable to pay our mortgage payment. During that time i signed my name off of the grant deed. Later that year we walked away from the condo and the condo foreclosed. Now, 2012, my wife received a phone call from the lender on the second wanting a payment. The property resold in 2009 and now there calling. Can they come after her for payments, garnish wages or sue her? What is the best thing to do?
Hi Scott,
If the 2nd mortgage was a purchase money 2nd (you used all proceed from the loan to purchase the property and it closed the same day as the grant deed then this is considered a non-recourse loan in CA and they cannot collect. If the 2nd was not a purchase money loan then the lender can in fact collect on the loan even though it was wiped out in foreclosure and is not longer attached to the property. This would now be considered an unsecured debt. You can certainly try to settle with them. Some will take cents on the dollar.
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