Legal Question in Real Estate Law in California

Probably not. If the second loan qualifies as a purchase money loan, their only recourse is to the property, and if they become a sold-out junior loan, it is their loss. If both loans were originated by BofA, they also cannot choose to foreclose on the first to leave you liable on the second. However, if the second loan was ever refinanced, or if it was a HELOC and draws were ever made after the initial purchase, or if any of the funds went to anything other than the purchase of the house (such as consumer debt pay-down or renovation or remodeling), then it would not qualify as a purchase money loan. In that case the sold-out junior lender becomes an unsecured creditor with basically the same rights as a credit card company that you default on - meaning to send you to collections and if not paid, to sue you and get a judgment for the debt.

First of all, the question right now is whether you are liable on the promissory note that was secured by the second deed of trust. In answering this, I assume that Bank of America was the holder of the first deed of trust, which was just foreclosed. You do not state who the holder of the second deed of trust.

As Mr. McCormick points out, you have a defense to any lawsuit on the second note, if it was indeed subject to the purchase money anti-deficiency protection of Code of Civil Procedure section 580b. Determining whether a loan falls within that class is a factually intensive procedure, and involves issues of whether you refinanced, and what the money in the loan was used for. I do suggest you speak to a competent real estate attorney, at length, to determine whether you are protected or not.

Additionally, if the same lender that foreclosed on the first, held the second, then they cannot sue you on the note, and they are not considered a frozen out junior lienholder. That is because they foreclosed on their own security, and you would be protected by Code of Civil Procedure section 580d.

I think that's what I already said. LOL