Senate Bill 1178 Vetoed by Terminator
Just the other day, on Thursday, September 30, Governor Arnold Schwarzenegger vetoed Senate Bill 1178—a bill that would have provided homeowners who have refinanced with the same “anti-deficiency” protection they have in their original mortgage loans. As the law reads right now, this “anti-deficiency” protection is only provided to homeowners who have not refinanced. The ideology behind Senate Bill 1178 (Corbett) was that it would have extended this protection to homeowners who had refinanced in order to obtain a lower interest rate or who used cash from a refinance for home improvements only.
While this bill was supported by the California Association of Realtors® and other consumer protection groups, mortgage and banking institutions did not support Senate Bill 1178 as more mortgages would have been without “recourse” after foreclosure.
The current law was put on the books in the 1930s. At that time, the mortgage and housing industry was very different than it is now. Proponents of Senate Bill 1178 believed that California was ready for a change, yet sadly the Bill was vetoed.
In addition to this bill, Senate Bill 931 is still on the table in the state of California. Also, all participants in a short sale may be eligible for our government’s HAFA short sale program or the Mortgage Debt Relief Act of 2007