Legal Question in Real Estate Law in California

Re: Short Sale Vs Foreclosure

No. If the lender uses the non-judicial foreclosure method [they sell the house by taking bids on the courthouse steps instead of the court selling it], which is what almost all do in California, then they are bared by law from going against you for any difference [so call anti-deficiency law]. When the senior loan [the first mortgage] forecloses, it wipes out the second junior mortgage.

In a short sale, you have worked ut an agreement with the lenders that they will accept less than their loan amounts in return for your placing the house up for sale at a lower price likely to result in a quick sale. But you normally are not allowed to keep anything from the sale and usually it must be the home in which you live. Although lenders ae releasing stories that they are much more willing to work with borrowers in trouble, ans thus agree to more short sales, the newspapers report that the lenders still basically ignore requests from borrowers.

Please see various prior answers from the attorneys on this site as to possible ways to resolve the problem. perhaps one will work [including trying to find someone who will make the monthly payments or a portion of them in return for a portion of the equity when the home is sold 2-3 from now in a better market].

Good luck.