Legal Question in Real Estate Law in California

A lender can only foreclose a loan on which the borrower is in default. The ordinary way of defaulting is to stop making the payments on that particular loan. However, loans to the same borrower may be "cross defaulted," meaning that a default on Loan X is also a default on Loan Y even though Loan Y is current as to payments. I believe commercial loans are more likely to be cross-defaulted (and cross-collateralized) than are home loans, but you should review the terms of the first mortgage to see what acts and omissions can be treated as defaults by the lender. Finally, I should add that there may be good reasons to want to avoid a default on the first, but defaulting on an equity line likely will produce the same result (foreclosure).

I generally agree with Mr. Whipple's answer. Where I disagree is his comment that cross-default provisions are less common on consumer loans. Pretty much any loan that will be in second position of lien priority will have a cross-default provision, so that the holder of the second can try to foreclose ahead of the first to avoid being a sold-out junior loan.