Lawsuit: Capital One Illegally Squeezed Short Sale Homeowners On Deficiency Payments

Courthouse News Service reports:

• Homeowners say in a class action that Capital One illegally made them pay thousands of dollars in deficiency contributions after short sales of their homes, though the state prohibited that in 2010.



• Then-Gov. Arnold Schwarzenegger signed Senate Bill 931 into law in late 2010 to reduce foreclosures and boost short sales. Before the law took effect in January 2011, homeowners had no incentive to short sell their homes because while lenders could not obtain a deficiency judgment on foreclosed properties, they could go after homeowners who sold short.



• "However, it quickly became apparent that where there was a second mortgage, the junior lien holder often refused to release the lien and the short sale never went through," according to the complaint.

For more, see Class of Homeowners Sues Capital One Over Short Sales.

For the lawsuit, see Teson v. Capital One, N.A.