Legal Question in Real Estate Law in California

You've asked an interesting question.

By referring to recourse/ nonrecourse, I assume that you are referring to the purchase money anti-deficiency protection of Code of Civil Procedure section 580b. The general rule is that a loan loses its purchase money character when it is refinanced. A deed of trust given to secure refinancing of the original "purchase money mortgage" is not a "purchase money mortgage" and therefore not within the ambit of Code of Civil Procedure section 580b. (Union Bank v. Wendland (1st Dist. 1976) 54 Cal.App.3d 393, 400.)

There was an attempt, last year, to pass legislation that would change this in the situation to allow the purchase money protection to remain where a borrower refinances the obligation without taking any additional money out. The bill, however, failed and was not passed by the California legislature.