Legal Question in Real Estate Law in California

A lot of things would have to go wrong for the bank to do that. First of all, I am assuming that the only security for the loan is the deed of trust on the "old house." A lender can only put a lien on the new house if you consent, or if they obtain a judgment.

Most lenders in California foreclose nonjudicially, at a trustee's sale which does not involve a court hearing or lawsuit at all. It takes about 4 months from start to finish (assuming there are no postponements). California law has anti-deficiency provisions. The one that comes into play here is set forth in Code of Civil Procedure section 580d. That section prohibits a lender from obtaining a deficiency judgment after exercising the power of sale in a deed of trust by way of a trustee's sale.

For a lender to get a deficiency judgment, the lender would have to file a lawsuit to foreclose. Those are incredibly rare, because they are expensive and time consuming. There are other anti-deficiency provisions that apply to these types of sale, such as a prohibition on a deficiency judgment for any purchase money loan. (See Code of Civil Procedure, section 580b.)

There are, of course, exceptions to these rules, such as lawsuits for fraud or bad faith waste, but they are also rare. As I mentioned at the start of this answer, a lot of things would have to go wrong for that to happen.