Legal Question in Real Estate Law in California

Not generally. They would have to sue you for the debt and include a judicial foreclosure in the action. 99.9% of the time that is too much trouble, time and expense for the lenders. If they do the normal non-judicial foreclosure (technically called a trustee's sale) the "one form of action rule" prevents them from collecting any more on the debt by any methods. Of course if there is a second, such as a home equity loan, that gets wiped out by the foreclosure, they can come straight after you.

Contrary to popular belief, most of the time I agree with Mr. McCormick. I think he is a bright and experienced lawyer, but for some reason, however, he confuses the anti-deficiency prohibitions of Code of Civil Procedure section 580d with the one action rule of Code of Civil Procedure section 726. I have pointed this out before, and so has Mr. Whipple (not the "squeeze the charmin guy, an attorney who contributes to Lawguru), but Mr. McCormick keeps saying it.

If a lender nonjudicially forecloses pursuant to the power of sale by way of what is known as a "trustee's sale," the lender cannot seek a deficiency judgment. "No judgment shall be rendered for any deficiency upon a note secured by a deed of trust or mortgage upon real property or an estate for years therein hereafter executed in any case in which the real property or estate for years therein has been sold by the mortgagee or trustee under power of sale contained in the mortgage or deed of trust." (Code of Civ. Proc., sect. 580d.) A deficiency is the difference between the amount of the oustanding debt and what was bid at the foreclosure sale.

This has been the law in California since 1940. If a lender wants a deficiency judgment, which is the only way to get a "lien" on other property, the lender must file an action for judicial foreclosure. But another anti-deficiency prohibition comes into play. If the loan that is subject to foreclosure comes within the "purchase money anti-deficiency prohibitions" of Code of Civil Procedure section 580b, then the lawsuit to foreclose is a waste of time. Determining whether the foreclosing loan is a purchase money "mortgage" or deed of trust is factually intensive, and should be reviewed by a competent attorney.

With that said, there are several issues that I see, that cannot be cleared up by the facts you have provided. First, as pointed out by Mr. McCormick there is an issue whether a second lien remains on the property. If the first forecloses, the general rule is that the second lien holder becomes what is known as a "frozen out junior lienholder." That is because there is no security to foreclose on anymore, because the senior lienholder's foreclosure relates back to the original deed of trust. The junior can then sue directly on the debt, although there are exeptions to this rule.

The other thing that Mr. McCormick does not address, and why I point out that his single action rule is erroneous, is when more than one property is security for a loan. As often and correctly pointed out by Mr. Whipple, a nonjudicial foreclosure by way of trustee's sale is not an action. (Walker v. Community Bank (1974) 10 Cal.3d 729, 736; Birman v. Loeb (1998) 64 CAl.App.4th 502, 509.) So if two parcels of real property are security for one loan, a lender can foreclose on one, or both.

This application is also important when considering that you ask about a mobile home. Mobile homes can be considered personal property, and when fixed to land, can be considered real property. A nonjudicial foreclosure on real property does not prevent resort to the mobile home under what is called "mixed collateral" rules if the mobile home was also made security for the loan.

First, let me say I agree with Mr. Roach, and Mr. McCormick is also essentially right, despite a small defect, pointed out by Mr. Roach, in the reason he gives for his conclusion.

Next, let me add that the learned discussion between the lawyers is probably a lot more technical than you need or care about.

In essence, banks rarely go after deficiencies from home-loan borrowers on purchase-money first deeds of trust. The rare exceptions might be where the bank knows the borrower is quite wealthy, or has committed loan-application fraud, or has abused the property that was collateral for the loan, or has otherwise been very uncooperative with the lender, or possibly where the lender is an individual rather than a deep-pockets financial institution. Otherwise, you are 99.9% safe from the complicated, time-consuming and expensive process of judicial (in court) foreclosure and a deficiency judgment. After a trustee sale, you are all done with that loan.