“I’m several months behind on my mortgage and need to do a short sale. I’m afraid the bank is going to foreclose, but an agent told me that once I start a short sale the bank it’s illegal for them to foreclose. Is that correct?”
***ANSWER:
I wish it was. You’re talking about California Senate Bill 900.
I’ve read/skimmed SB900 regarding this exact topic. It seems very clear that the servicer (i.e. your bank) is only prohibited from filing a foreclosure notice if they have APPROVED your short sale in writing.
Having one in process does not appear to stop a foreclosure.
Below is what appears to be the relevant clause from the California Legislative Information website:
SEC. 14.
Section 2924.11 is added to the Civil Code, to read:
2924.11.
(a) If a foreclosure prevention alternative is approved in writing prior to the recordation of a notice of default, a mortgage servicer, mortgagee, trustee, beneficiary, or authorized agent shall not record a notice of default under either of the following circumstances:
(1) The borrower is in compliance with the terms of a written trial or permanent loan modification, forbearance, or repayment plan.
(2) A foreclosure prevention alternative has been approved in writing by all parties, including, for example, the first lien investor, junior lienholder, and mortgage insurer, as applicable, and proof of funds or financing has been provided to the servicer.
Please verify this with an attorney.
