Fisher Law Corporation’s Frequently Asked Questions

The following are select subjects which are representative of the type of law we practice. Peruse the articles: If you don't find a subject that interests you, call us or e-mail us with your request.

Notice: The information contained in these articles is designed to provide accurate information in regard to the subject matters covered and is made available with the understanding that the information provided does not constitute the rendering of legal or professional services. All information is of a general nature, is specific to California law only, and is not intended to to replace professional or legal advice. Each person’s situation is unique and the information contained herein cannot be applied to any individual’s situation. If legal advise is required, the services of a professional should be sought.


What is an all-inclusive deed of trust? »

What is CERCLA? »

How does a condominium differ from a house? »

What are Covenants that run with the land? »

What is a deed in lieu of foreclosure? »

What are easements? »

What are Encroachments? »

How does escrow work? »

What is fire and flood insurance? »

How do foreclosures work? »

What are the different forms of doing business? »

What do trade terms mean? »

What are liquidated damages in real property contracts? »

What is a Lis Pendens? »

How do loan modifications work? »

What is a Mechanic’s Lien? »

How does a Multiple Listing Service work? »

What is an off-shore trust? »

How do real property taxes work? »

What is Procuring Cause? »

What is a Quitclaim Deed? »

What is RESPA? »

Who bears the risk of loss during escrow? »

What are second deeds of trust? »

What is the Statute of Frauds? »

What is Statute of Limitations on Debts Secured By a Mortgage? »

Does a buyer’s broker have a duty to inspect? »

What is The Parol Evidence Rule? »

What is Adverse Possession? »

 


Q. How do foreclosures work?

A. During the Great Depression, the legislature enacted a moratorium postponing foreclosure sales, extending the redemption periods, permitting the cure of defaults, and abolished or limited deficiency judgments. Part of this legislation was an emergency enactment and was effective only for a short period of time, but other parts became a permanent part of California law.

The intent of the legislation was to prevent a secured creditor from selling the real property at a foreclosure sale for an amount less than its fair market value and then seeking a personal judgment against the debtor/former owner for the unpaid balance of the debt.

Code of Civil Procedure, Section 580b, states in pertinent part:

No deficiency judgment shall lie in any event after any sale of real property for failure of the purchaser to complete his 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 real property, 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 such dwelling occupied, entirely or in part, by the purchaser.

The characterization of a loan as purchase money or nonpurchase money is determined at the time the loan is made. The antideficiency limitations that prevent a party from recovering a deficiency judgment against a borrower when enforcing a purchase money deed of trust or mortgage apply only to the standard transaction. A transaction which does not serve the public policy objectives of the law is nonstandard, and the antideficiency laws do not apply.

There are two general types of standard transactions: a note and deed of trust which are executed by the buyer in favor of a seller for part of the purchase price of the property and secured by the property, and a note and deed of trust given to a third party lender, such as a bank, by the buyer for part of the purchase price of the property. In the second type of standard purchase money loan, the loan from the third party lender must be secured by residential property containing four or less units, and at least one of the units must be occupied by the borrower.

Lower interest rates has often created a floodgate of refinancings. By refinancing a purchase money loan, the borrower loses the antideficiency protections.

As stated above, the antideficiency protections extend only to standard purchase money loans. When a seller of real property subordinates his deed of trust to another loan, such as a construction loan, the application of the antideficiency laws no longer serves the policy objectives of the legislation. This is because the buyer has changed the intended use of the property and the law protects the seller from the risk of change in value.

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—George Washington