Legal Question in Real Estate Law in California

There is no federal law to protect you. The second is what is known as a sold out junior lienholder, and can sue you on the promissory note, because there is no security to foreclose on. This lawsuit could be defended if the holder of the first and the second were the same lender, or if the second loan could be considered a purchase money loan.

I suggest you consult with a competent real estate attorney familiar with this area of the law, immediately.

There is no federal law that protects you from a "sold out junior," other than the Bankruptcy Code. There MAY be California state laws that protect you, but only under certain circumstances. You will need to go over your specific situation with a lawyer to find out if they apply to you.

Under the "Contracts Clause" of the U.S. Constitution (Article 1, Section 10), no state may make a law impairing the obligation of contracts. Although this Constitutional provision has been watered down considerably by Supreme Court interpretations since the early 19th Century, I'm pretty sure there is no California law that would prevent the creditor from suing. Same goes for Federal laws.