Legal Question in Real Estate Law in California

A home loan doesn't evaporate when the borrower dies. It remains a lien on the property, and failure of the new owners to pay it off, or make the payments, will generally result in foreclosure.

The general rule is that the person responsible for managing a decedent's estate (executor, administrator) must pay the estate's debts from estate assets before, or at the time, the heirs get any inherited property. If John Doe dies with $7,000 worth of stock and owing $3,000 on his credit cards, the heirs get $4,000 net.

When the property passes by trust, as apparently happened here, rather than through a will or by intestate succession, the trustee(s) are in charge of managing the property for the benefit of the beneficiaries, and that includes paying the property taxes, mortgage, etc. - not from their own money, but from the trust's money, which is ultimately the beneficiaries' money.

Since you and your sister got ownership in your names, that points to your being the beneficiaries, and thus responsible for the debt on the house.

The loan is against the house. Either pay it off, sell it, or lose it to foreclosure.