Legal Question in Real Estate Law in California

First, I'd suggest taking a careful, realistic view toward the current and short-term future market value of the first home -- maybe get a free market-value guesstimate from one or two local real-estate firms. This will help you make critical decisions with the best-available (free) information. Then, you should consider discussing possible short-sale scenarios or modification programs with your lender.

If you do go to foreclosure, that's usually the end of the story. You lose the home, probably not any equity, you have moving costs and maybe some personal-life disruptions, and your credit rating takes a hit.

Less frequently, there are other consequences. These can include (1) lawsuits for the balance due on any second, etc. loans secure by the same property that was foreclosed upon by the holder of the first, causing the junior loans to become unsecured obligations of the borrower; or (2) rarely, lawsuits from the foreclosing lender for matters not directly connected with the loan itself, such as "waste" (not keeping the property in good repair, or maybe you logged off the landscape trees and sold them to the sawmill a week before the trustee's sale (or the like)).