Compliance Bulletin

Supreme Court Affirms no Deficiency is Allowed Following a Short Sale
February 16, 2016

The California Supreme Court issued an opinion that, had it been published five years earlier, would have meant a lot more. In 2010 the California Legislature enacted Senate Bill 931 prohibiting a secured lender from obtaining a deficiency from a borrower following a short sale of the secured property where the proceeds are insufficient to satisfy the secured loan. The facts in the case, Coker v. JPMorgan Chase Bank N.A., occurred before enactment of the statute and the issue raised was whether an existing statute, Code of Civil Procedure section 580b, which traditionally is understood to bar deficiency judgments following a foreclosure sale, also applies to short sales. The Supreme Court reviewed the law and the cases interpreting it and said yes. The case has less practical value now because of the intervening enactment of SB 931, but it does raise some questions about the scope of those protections. See CBA’s Regulatory Compliance Bulletin for more information.

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