Legal Question in Real Estate Law in California

I hate to "punt," but you really need to sit down with a real estate attorney in your area. There are a lot of factors that can affect whether or not you will be liable in a foreclosure, or in a short-sale for a "deficiency" (the difference between home loan balance, and the bank's actual recovery). There is not much you can do, short of filing bankruptcy, to avoid liability if it exists - it is a function of the loans you already have (purchase money, refinance, cash-out, 1st, 2nd, etc...) rather than something you can change at this point. A short-sale is a completely voluntary acceptance on the part of the bank of less than what they are owed, and often you will remain on the hook for the "short," unless someone negotiates a better deal for you. It is well worth your time, and an hour or so of the attorney's time to evaluate your situation, and give you some concrete advice. It really is not possible to give you a firm answer here without a lot more information. Good luck.

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Do you have any indication so far as to whether the lender is planning to foreclose by trustee's sale or by taking you to court for a so-called judicial foreclosure? It must do the latter in order to get a deficiency judgment (that's the technical name for a judgment for the shortfall between what the property sells for and the amount due, including costs. If there is a trustee's sale, you are almost assured that's the end of the matter as far as the foreclosing lender. If there are junior loans, those lenders would lose their collateral and become unsecured general creditors and could come after you, so let's hope there is no second on the property. No deficiency judgment is available for purchase-money loans, either. In rare cases, a really upset lender might sue you for something only somewhat related to the deficiency, such as loan-application fraud or deliberate damage to the collateral, but this is rare. Overall, unless you look like a really rich guy, or a crook, to the lender, they won't bother with any of their deficiency opportunities, if any, and will go the easy route through a trustee's sale, and then you're done with them.