Legal Question in Real Estate Law in California

I wouldn't call the provisions of California Code of Civil Procedure section 580b a nonrecourse foreclosure requirement. A nonrecourse note is a promissory note in which the lender may only look to the deed of trust and foreclose. Section 580b is an antideficiency provision, that prohibits a deficiency judgment. A lender could still foreclose by way of court action, and may look to other security. (And get an award of attorneys fees against the borrower.)

Historically, the application of section 580b was determined at the time the transaction was executed. (Paramount Sav. & Loan Ass'n v. Barber (1968) 263 Cal.App.2d 166, 167-169.)

I have not yet found an opinion that deviates from this principle. I don't read the statute the same way the courts do, however, and I read don't read the statute that specifically. The policy, however, is to give the statute the broadest possible application.

The public policy behind section 580b was to discourage lenders from encouraging real estate speculation at the expense of home buyers (guess that didn't work so well lately, eh?). Therefore, I think the holding of Paramount Savings is quite sound. The public purpose of the statute would be seriously weakened if a very common change in circumstances down the road would eleminate the application of the statute. And in any case, that is the law in effect as of now, if Mr. Roach's research is correct (I did not Shepardize the case myself to see if there are any subsequent contrary decisions).