Legal Question in Real Estate Law in California

The first thing to do is find out if there is really a judgment. If there is, it was taken by default and you are going to have to set it aside.

The second thing you need to do is have an attorney review the matter and determine if the second was really a purchase money, and when it was transferred from the same lender (ie, before or after foreclosure.)

I believe that there is case law indicating that if both loans from the same lender are purchase money then they are merged together. Also, even if they were not, you are entitled to a credit for the fair market value of the property not just what the senior lender paper bid at the foreclosure sale. The collection agency will probably refuse to accept that as you can not trust them as to anything.

The collection agency is very likely making threats that they are unable to back up. Very likely, there is no judgment -- but you need to be VERY certain of this. There do not appear to be grounds for a judgment here, either in the past or in the future. You are probably exempt from a deficiency judgment under the antideficiency laws as Mr. Shers indicates, but there are exceptions that might affect one case in 400, such as fraud, waste, etc. In short, do not believe anything the collection agency claims -- it may be true, but it probably isn't. See a lawyer if you find there is a judgment or if a lawsuit is initiated against you. Otherwise, relax.