A California beneficiary gives written consent to a short sale of a dwelling containing three units, and the property sells for less than the balance owed on the deed of trust. Under Code of Civil Procedure 580e, what may the beneficiary do about the unpaid balance?
Correct Answer
A) Nothing; a holder that consents to the short sale of a dwelling of four units or fewer may not pursue any deficiency
Code of Civil Procedure 580e bars a deficiency on a note secured by a deed of trust or mortgage on a dwelling of not more than four units once the holder consents in writing to a sale for less than the amount owed and the sale proceeds are tendered to it. The bar does not turn on whether the loan was purchase money or on lien position, so a consenting junior holder is covered along with the first. Any purported waiver of that protection is void and against public policy, which means the short sale agreement cannot revive the right to collect. The statute leaves the holder only its claims for fraud or waste, and it does not protect borrowers that are corporations, limited liability companies, limited partnerships, or political subdivisions.
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