The L.A. Times reports that two new bills in the California state legislature seek to prevent banks from seeking deficiency judgments against individuals that walk away from underwater mortgages and those that give up their properties via short sale. As someone who generally likes California, I have to admit, this just makes me like the state even more.
Given the fact that property values were obviously inflated during the lending boom, it seems that homeowners shouldn't be left holding the bill. Some may argue that it is an issue of personal responsibility -- these people made a choice. The difference here is that these choices were generally made based on bad information. If a doctor told you that a heart transplant had a 0% chance of complication, and you consented to that surgery, did you really give informed consent? How is it different for home purchasers who were told that values only went up, that they could refinance that exotic ARM before it adjusted, &c.?
So, State of Illinois, I challenge our legislators to introduce similar legislation. Many of the Federal statutes have protections that expire before homeowners need them or are aware that they were protected. It is incumbent upon the states to protect their citizens from this crisis.
