The California Legislature has amended the rules for seconds suing after a foreclosure suit. Under current law, after foreclosure sale by the first, the second can sue for the note unless it was part of the purchase price. But starting January 1, 2013 the rules will be changed to prevent the seconds from suing on refinances too.

The law provides that no deficiency judgment shall lie in any event on any loan, refinance, or other credit transaction that is used to refinance a purchase money loan, as defined, or subsequent refinances of a purchase money loan

However there is an exception for refinances that had a cash out or a HELOC where additional funds were withdrawn,

These provisions would apply to a loan, refinance, or other credit transaction used to refinance a purchase money loan which is executed on or after January 1, 2013.

For more information contact [email protected] or go to DiJulio Law Group