§ 580e.No Deficiency Owed Or Collected Upon Note Secured By Deed of Trust Or Mortgage For Dwelling of Not More Than Four Units

Short sales close a gap the older anti-deficiency statutes didn't fully cover: a sale approved by the lender, for less than what's owed, that never goes through foreclosure at all. Where a note is secured solely by a deed of trust or mortgage on a dwelling of four units or fewer, no deficiency can be owed, collected, or even sought if the owner sells for less than the outstanding balance with the lender's written consent, and both the title transfer and the tender of sale proceeds happen as the parties agreed.

Where the note isn't secured solely by that dwelling — other property also secures the debt — the protection narrows but doesn't disappear. No deficiency judgment can be entered on that note itself, and the rights of everyone involved with respect to any other property securing the loan are treated as if the dwelling had been foreclosed through a trustee's sale for a price equal to the short-sale proceeds, following the approach § 580d already takes for trustee's sales.

A lender can't demand extra compensation beyond the sale proceeds in exchange for consenting to the sale, and the protection doesn't shield a trustor or mortgagor who commits fraud or waste with respect to the property — the lender keeps its ordinary remedies for that. The section doesn't apply where the trustor or mortgagor is a corporation, LLC, limited partnership, or political subdivision, and it carries the same carve-out for certain regulated bonds and public utility debt found in § 580d. Any waiver of these protections is void as against public policy.