Legal Question in Banking Law in California

If the loan was a "purchase money" loan, meaning taken out when you bought the condo and used entirely to buy the condo, the bank cannot come after any other assets.

If the loan was not a purhase money loan, if it was refinanced for example, then the bank cannot come after any other assets if they do what most people think of as "foreclose." That is where they record a notice of default, then after the statutory time issue a notice of sale and sell the property (though usually the bank winds up just taking it because there are not bidders who will bid the amount of the debt or more). The correct term for that process is Trustee's Sale. Once a Trustee's Sale goes forward, the bank cannot look to any other assets to satisfy the debt and cannot sue to enforce it. The debt is extinquished.

If the loan was not a purchase money loan, AND the bank wants to be able to go after the borrower for any unpaid balance after the sale, the bank has to file an actual foreclosure lawsuit and obtain an order for sale an order that any amount unpaid after the foreclosure sale will become a personal judgment against the debtor. There are many disadvantages to the bank in going that route, but if the property is upside down by a large amount and the borrower has other assets worth pursuing, they sometimes do.

So, turning to the trust, IF it is not a purchase money loan and IF the bank went to the trouble of a foreclosure lawsuit, only then could the bank even try to get to the trust asset. Whether they could succeed depends on the nature of the trust. If it was one the siblings set up for themselves as beneficiaries and it is a revokeable trust, then the bank could probably reach your husband's interest in the property eventually. If it was a testimentary trust set up by their parents and passed to the siblings when they died, and the siblings don't have the right to invade the trust, only to receive income, then the bank probably could not reach it. There are too many variations on this theme to give you any real advice on what would happen with the particular trust in question.

If the loan that is in default was used to purchase your condo, then the bank can only take the condo.

If that loan was not for purchasing the condo (e.g. it was a refinance or a 2nd loan), then the lender can conduct a "judicial foreclosure." In this process, the lender brings a lawsuit against the borrower, and if the lender prevails, the lender gets a judgment to foreclose, plus a judgment for the "deficiency," which is the amount of the loan that the foreclosure sale did not cover.

If there is a deficiency judgment, the judgment creditor can enforce the judgment against the borrower's property. If your husband's trust is the typical inter-vivos trust (some people call it a "living trust"), then it is likely that the property will be subject to the judgment creditor's enforcement of a deficiency judgment.

Here's a note that might help. Lenders typically do not conduct judicial foreclosures because they are long and expensive, compared to a non-judicial foreclosure that is relatively quick and cheap, but does not allow for a deficiency judgment.