Legal Question in Real Estate Law in California

Whoever signed the promissory note is liable for the second. When the first foreclosed, the second became what is known as a frozen out junior lienholder. The general rule is that they can sue the signers of the promissory note for the debt, unless the foreclosing lender on the first was also the lender on the second.

You appear to have a second issue, referring to the borrower dying. This may affect the statute of limitations for the second, and require the lender to bring a creditor's claim against the decedent's estate. It is not clear from your post, however, whether the person who died was the only signer of the promissory note, or more than one person signed, obligating themselves to pay the underlying debt.

The estate of the decedent is responsible for the debt. When a first mortgage is foreclosed upon, the second mortgage is what is called a "sold out second" or "sold out junior." Because they took their mortgage subject to the first, their security was foreclosed on along with the owner's ownership. The second then stands in the position of an unsecured creditor, just like a credit card company for example, and they have all the same rights and remedies as any unsecured creditor. The only exception is if both the first and the second were made at the time the property was purchased, used entirely for the purchase, the property was the buyer's residence, and the second has never been refinanced. In that rare case the second cannot collect at all due to an unusual California statute. So the second in your case has the right to collect as an unsecured creditor of the estate of the decedent.

So what does that mean as to who has to pay? That can't be conclusively answered because you gave no information about the decedent's estate. Were there other assets? A will? If so, was it probated? If not, has an intestate probate been opened? Is probate still open? Have any heirs been given or taken any property or assets that belonged to the decedents already or is that still pending? The bottom line, though, is that only the decedents other property and assets can be reached to pay the debt. If the assets are still held by the estate, whether in probate or not yet probated, none of the heirs or family have any responsibility for the debt. If, however, anyone has taken or been given anything from the estate without paying all debts of the estate, the lender can go after them for up to the total value of whatever they got from the decedent's estate.

Just to clarify, you state that "the borrower" died. My answer is predicated on that meaning that there was only one legal owner of the house and that is the borrower who died. If that is not the case, then as Mr. Roach states, any co-borrowers who signed the promissory note would still be responsible for the debt.