Non-Recourse Loans; A Special CA Regulation

When a normal person buys a normal home in CA and gets a normal home loan from a normal lender, California Law states that if there is a default in payments, the normal lender can “only look to the home”. They can not get a judgment against normal owner’s other assets even if they do a Judicial Foreclosure. The loan is considered “Non-recourse. CA is only one of twelve states that have this law.

This special law is from the Code of Civil Procedure, 580B.  “No deficiency shall be owed or collected, and no deficiency judgment shall lie (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 of part of the purchase price of that dwelling, occupied entirely or in part by the purchaser. The loan is a “purchase money loan”.

In plain English:  If you buy a home today and get a loan, since the loan is purchase money, no lender can take away any of your other assets. And they must go through a Foreclosure to get the property back (in a normal situation this would be by Trustee Sale Auction or Non-Judicial Foreclosure).

Agents:  Learn all about 580B and give a copy of it to your clients. Take away one fear from purchasing in this market.

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