Legal Question in Real Estate Law in California

The lender has to treat each property separately. They can only force a sale of a property if you have not made the contractually required mortgage payments. So you could default on the California home and live in the other one. Having the home foreclosed on is the worst of the options, but sometimes the only one.

Your proposed solution seems reasonable in the circumstances. The foreclosure of the CA house would be under CA law, and you'd enjoy the protections of CA's anti-deficiency statutes unless you fall into one of the unprotected categories, mainly having a loan which is a refi rather than the original purchase-money loan. Even if it is a refi, the lender would have to forego the quick and simple trustee-sale foreclosure proceeding and take you to court for a judicial foreclosure, which is expensive, time-consuming and gives you a redemption period. There is no risk-free solution, but if the CA loan is purchase money, you're pretty safe unless you have a loan-application fraud problem or have committed "waste" of the collateral (both unlikely).