The 60 Minutes program did a piece on how the banks are creating faudulent documents so that they can foreclose on homeowners.  In the go-go years of 2003-2007, the banks were in such a hurry to make money off of you and I, that they did not get the proper paper work signed and now they do not have the appropriate documents to foreclose on their borrowers.  So what are they doing?  They have gone to large document creating firms, like LPS, to have them fraudulently create the missing documents.  There is now a growing grass roots movement to address this fraudulent behavior.  Lately the banks have been much more responsive to doing short sales, I wonder if this is the reason why.  Isn't it better to approve  the short sale and have the homeowner sell the property than get caught at trying to fraudulently create missing documents?

LAW AGAINST SHORT SALE DEFICIENCIES EXPANDED
In a major victory for REALTORS®, Governor Brown signed into law today a C.A.R.-sponsored bill, Senate Bill 458, prohibiting a deficiency after a short sale for one-to-four residential units, regardless of whether the lender is a senior or junior lienholder.  Effective immediately for transactions closing escrow from this day forward, both senior and junior lienholders cannot require a borrower to owe or pay for a deficiency in a short sale.  This law also prohibits any deficiency judgment to be requested or rendered for senior or junior liens after a short sale of one-to-four residential units.  Any purported waiver of this rule shall be void and against public policy.
Although a lender cannot require a borrower to pay any additional compensation in exchange for a short sale approval, the new law does not prohibit a borrower from voluntarily offering a monetary contribution to a lender in hopes of obtaining a short sale.  A lender is also permitted under the new law to negotiate for a contribution from someone other than the borrower, such as other lenders, agents, relatives, and the like.
Exceptions to the new law include a lender seeking damages for a borrower’s fraud or waste; a borrower that is a corporation, LLC, limited partnership, or political subdivision of the state; a lien secured by a bond as specified; a public utility lien; and additional rules apply if a note is cross-collateralized by more than one property.
This law is fully set forth as Senate Bill 458 (Corbett) at www.leginfo.ca.gov.

Glenn's  comment:   The author seemingly missed an unintended loophole.  A foreclosure still allows the lenders to seek a deficiency judgment.  What would be the incentive for either the First or the Second/Equity lender to choose a short sale any longer when they can still go ahead and foreclose and still have the right to pursue a deficiency judgement?   This bill could backfire hurting homeowners more than helping them.   We'll just have to wait and see how the lenders respond to this .