Legal Question in Real Estate Law in California

Re: Foreclosure

That difference is called a "deficiency." Code of Civil Procedure section 580b prevents your lenders from suing to collect a deficiency in this scenario.

Good luck.

Re: Foreclosure

This question can't be answered in one sentence. An analysis of your risk starts with whether the loans on the property are purchase-money loans or refinance loans. Also important is which lender initiates foreclosure and whether the lender believes you have other assets that could be reached, making a judicial foreclosure (instead of a trustee sale) worthwhile.

In any case, purchase-money lenders and lenders which elect to foreclose by trustee sale are not entitled to a deficiency judgment - they can take what they are owed from the foreclosure proceeds, then that's it, unless they have other grounds for suit, such as loan-application fraud or malicious waste of the collateral.

Assuming your first is purchase-money and the junior loan is a second taken later (the most usual scenario, I suppose) and that the holder of the first is the one that forecloses, that lender is not entitled to a deficiency judgment whether the foreclosure is by trustee sale or by judicial process.

However, after the foreclosure, the lender on the second becomes a "sold-out junior," has lost its security, and can sue you as an unsecured creditor. This is a fairly common danger.