Legal Question in Real Estate Law in California

Re: foreclosure

Whether your loans are conventional mortgages (rare in California) or notes secured by deeds of trusts (usual in California), the lender can go to court and commence so-called judicial foreclosure. In addition, if the loans are of the latter type (note and deed of trust), the lender can foreclose out of court by trustee's sale.

Most deed of trust foreclosing lenders use the trustee sale route, because it is quicker and cheaper. However, by statute, a lender who forecloses by trustee sale must look to the collateral only and cannot go after the defaulting borrower for what is called a "deficiency judgment."

For this reason, a lender may elect to pursue the judicial foreclosure route rather than the trustee's sale method if it suspects the borrower may have other assets to satisfy a deficiency judgment. So, a lien or garnishment is possible. It may depend upon the amount of the likely deficiency. If your properties are worth within a few thousand bucks of the loan balance, the lender would probably go with a trustee sale and eschew the more costly, chancy and time-consuming trip to court.

In addition to the absolute prohibition on deficiency judgments after a trustee's sale in Code of Civil Procedure section 580d, California has another deficiency-judgment ban. This one prohibits a lender from pursuing a deficiency after foreclosure of a purchase-money loan (as opposed to a later-on refi or cash-out loan). However, this prohibition (found at Code of Civil Procedure section 580b) applies only to seller financing, and to lender financing for certain owner-occupied residences. This section may or may not be helpful.

I know these rules are a bit complex, since their application depends upon the type of loan, type of property, and the foreclosing lender's election, but you can probably study them and see where you stand.

I advise looking up and reading the CCP sections cited yourself, so you can see the exact language, then seeing a real-estate lawyer if you have any remaining doubts.

Re: foreclosure

You should not be investing without knowing the answers to these questions. You are opening yourself to future problems and being ripped off.

As to the three properties,are they deeds of trust with power of judicial sale or the more common in California of mortgages with the power of sale. As to the later, they can only have a public sale once foreclosure is ready, and they can not go after you for anything else. A judicial sale allows for them to go after you for any unpaid balances, but most properties in California are by mortgage.