Legal Question in Real Estate Law in California

Re: credit line default

Well, it is one or the other, often depending upon how the lender elects to proceed, which in turn may be determined by the lender's perception of how wealthy you are.

An equity line of credit is usually not a purchase-money loan, which is usually statutorily exempt from any action that would result in what is called a "deficiency judgment," i.e., a judgment for a debt not repaid from the proceeds of foreclosure. So, you are probably not protected by the purchase-money exemption. That leaves the trustee-sale exemption. A lender cannot go for a deficiency judgment if it elects to foreclose by power of sale in a deed of trust.

Some lenders will endure the extra cost and time required to carry out an in-court, judicial foreclosure if they get a whiff of blood, i.e., there will be a big deficiency after a foreclosure and the borrower has other assets that can be made subject to a judgment lien.

So, the answer is that first it depends upon whether the foreclosure is by trustee's sale (safer for you) or by court action (danger signs!!!), and that in turn probably depends upon whether the lender thinks you have deep pockets, or may have falsified your loan application, or has other issues with you that tempts it to play hardball.

Re: credit line default

Mr. Whipple, as usual, have given an excellent, an instructive, comprehensive answer.