Legal Question in Real Estate Law in California

Here is a short list of things to worry about:

1. If the lender decides to take you to court and sue for foreclosure rather than use a trustee's sale, and the loan being foreclosed is not a purchase-money loan (i.e., it is a second or a refi loan), the lender can ask the court for a judgment for any deficiency after the foreclosure sale. This is quite rare.

2. If you have a second (or higher number) loan, and the first is foreclosed, the second (or ?) loses its collateral and can sue unless the loan was purchase money, in which case it cannot sue.

3. A lender can sometimes sue for something other than the unpaid loan balance, such as mortgage-application fraud or for trashing the property.

4. Your credit rating will drop significantly.

If you only had one deed of trust on the property, and the lender foreclosed by way of trustee's sale, and the sale is completed, then the lender cannot sue you for a deficiency pursuant to Code of Civil Procedure section 580d. That section, however, does not prevent a lawsuit for fraud, waste, or rent skimming.

If you had any subordinate deeds of trust encumbering the property, the senior lender's foreclosure causes them to become "wiped out" junior lienholders, who can then sue you on the underlying promissory notes, unless they were all held by the same lender. (Meaning the same lender who foreclosed at the trustee's sale.)