Legal Question in Real Estate Law in California

It depends on the nature of the second mortgage. If it is the mortgage that you took out at the time of purchase, and it is your primary residence, they cannot sue you. If it is a refinance, they can.

There is a difference between the rights of a junior lender which forecloses and suffers a deficiency, on the one hand, and a junior lender which loses its collateral to a foreclosure by the holder of the first, on the other. In the first case, Mr. Koenen's principle is more or less correct, i.e., that second lender cannot get a deficiency judgment against you (you could still be sued for something else, perhaps, such as loan-application fraud or waste). In the latter case, the second lender probably falls into the category called "sold-out junior" lender and becomes an unescured general creditor of the borrower, who is not then protected by the antideficiency laws. Formulating an optimum strategy for you based on bulletin-board level facts is simply not possible. If you have significant other assets that a creditor might reach, you should get personal legal advice. Nevertheless, we do note that lenders are not being particulary aggressive in going after borrowers for deficiencies. The few exceptions we see are where the borrower is suspected of fraud or waste, has wealth that can be tapped, or where the lender involved is an individual or small investment partnership that cannot afford to take a loan loss here and there.

Whipple is right. Koenen is probably not. The second would not only have to have been put in place at the same time you bought the property, it would have to have been used entirely to buy the property. If any of the money went elsewhere, pay down consumer debt to qualify for the loan, improvements to the property, etc., the anti-deficiency law does not apply even if placed at the time of purchasing a personal residence. You need to sit down with a lawyer and go over all the facts to develop a proper strategy for your situation.