Provides relative to a deficiency judgment in a short sale. (8/1/14) (OR NO IMPACT See Note)
Impact
If enacted, the bill will have significant implications for homeowners facing financial difficulties and potential foreclosure situations. It introduces a structured process for homeowners to negotiate their short sale, thereby allowing them to avoid a lengthy and often negative foreclosure process. The law aims to streamline interactions between creditors and borrowers, potentially preventing future legal disputes regarding deficiency judgments, as the creditor must waive such judgments if conditions are satisfied at the sale.
Summary
Senate Bill 576 seeks to provide specific guidelines surrounding short sales and deficiency judgments in Louisiana's real estate transactions. Under this proposed law, a short sale is defined as a real property transaction where the sale proceeds are less than the outstanding debt owed to the creditor. The bill stipulates that real property owners, classified as owner-occupants, can engage in negotiations for a short sale prior to receiving a notice of seizure. This process emphasizes the eligibility criteria set forth by federal and state statutes, facilitating the possibility of the creditor waiving the deficiency judgment, which is the remaining debt after the property sale.
Sentiment
The general sentiment around SB 576 appears to be cautiously supportive, especially among stakeholders interested in facilitating smoother real estate transactions. Supporters view the bill as a beneficial tool for homeowners allowing them a more dignified exit from financial hardship through organized negotiations rather than foreclosure. However, concerns also exist surrounding the adequacy of protection for creditors, who may face losses in recouping owed debts if waivers are provisioned without stringent checks.
Contention
Key points of contention arise from the balance between facilitating homeownership relief and protecting creditor interests. Critics may argue that although the law supports homeowners, it could incentivize property owners to pursue short sales instead of meeting their financial obligations. Opponents also might worry about the potential for abuse of the system, where property owners may not genuinely seek to resolve their debts. By providing this legal framework, the bill aims to avert an executory process in favor of negotiation, which represents a pivotal shift in the handling of real estate financial difficulties in Louisiana.