Legal Question in Real Estate Law in California

Re: Walk away from primary

When you say primary, I assume you mean your primary residence for tax and other purposes. That may have a favorable bearing on possible liability for a deficiency judgment.

The analysis begins with whether you are exempt from a deficiency judgment, which is a money judgment against you for the lender's loss when judicial sale of the security fails to pay off the forclosing lender. If the lender forecloses by having the trustee exercise the power of sale in a deed of trust, which is the usual means of foreclosure, there cannot be a deficiency judgment. There also cannot be a deficiency judgment if the foreclosed obligation was a purchase-money loan on an owner-occupied unit. These rules are the same whether the loan being foreclosed is a first or a second. That leaves refinancing, cash-out and line-of-credit loans that are foreclosed in court as subject to deficiency judgments.

In addition to deficiency judgments, a defaulting borrower also has to worry about two other kinds of legal attack. (1) When a higher-ranking obligation is foreclosed, and junior creditors thus lose their collateral, they become "sold-out juniors" and can sue on their notes as unsecured obligations of the borrower. This could indirectly result in a judgment which would become a lien on your other property. Then (2), a lender could perhaps also sue for loan-application fraud, waste, or other torts which are only indirectly related to the obligation being foreclosed.

Re: Walk away from primary

You are confused, clearly. Consult a lawyer and pay a few bucks for advice. One cannot advise you without collecting sufficient information and that takes some time. Remember, free advice is usually worth what you pay for it.