Originally, the Governor vetoed the first anti-deficiency judgement law, SB 1178, which had been passed by both the Senate and Assembly of California. But rather than arm-wrestle, they submitted SB 931, both houses passed it, and the governor signed it on October 1st.
From the California Association of Realtors:
SB 931 (Ducheny) Short sales and anti-deficiency
Existing law allows a mortgage lender to demand the right to a “deficiency” judgment for the balance due on a note as part of the lender’s negotiations in connection with a short sale. SB 931 requires the first lien holder to accept the agreed upon short sale payment as full payment for the outstanding balance of the loan. The bill does not apply this deficiency protection to junior notes secured by the real property. Lenders do not oppose SB 931 as it would ONLY prohibit a deficiency on a first mortgage note secured by real property when the property is sold in a short sale.
C.A.R. supports SB 931 as it does provide deficiency protections for homeowners; however, because this bill does not apply these protections to junior notes, or to foreclosures, C.A.R. believes that it does not go far enough.
SB 931 applies to short sales only, and those that close after January 1, 2011, where SB 1178 had also included the first mortgages that were foreclosed. There is no homeowner protection from the second-mortgage holders obtaining a deficiency judgement in SB 931. Owner-occupancy is not mentioned.
SB 931 also includes this anti-fraud verbiage:
The bill would specify that those provisions would not limit the ability of the holder of the first deed of trust or first mortgage to seek damages and use existing rights and remedies against the trustor or mortgagor or any 3rd party for fraud or waste if the trustor or mortgagor commits either fraud with respect to the sale of, or waste with respect to, the real property that secures that deed of trust or mortgage.
Here is the official language: sb_931_bill_20100930_chaptered