Deficiency After Nonjudicial Foreclosure
Cal. Code Civ. Pro. 580d does not bar a deficiency for a sold out junior (see Walter E. Heller Inc. v. Bloxham, 176 Cal.App.3d 266 (1985)), although, as we have seen, section 580b will bar some sold out juniors from recovery of a deficiency. However, the holder of a junior deed of trust that has sold itself out through non-judicial foreclosure on its senior lien will be barred from a deficiency on the note secured by the junior lien. In Simon v. Superior Court, 4 Cal.App.4th 63 (1992), a bank gave two separate, sequential loans to a debtor. The first loan, for $1,575,000, was secured by a first deed of trust on the debtor's personal residence. The second loan, for $375,000, was secured by a second deed of trust on the same property. Neither loan was purchase money. After default, the bank non-judicially foreclosured the first, credit bidding less than the amount due, and then sued the debtor for $375,000 on the second note. The court barred the bank from recovery on the second note, holding that it amounted to a deficiency barred by 580d.
Before you walk away from two loans, make sure you understand the law related to sold out juniors and short sale law.
Sold out junior law is pretty well settled, so you may have to consider your other options such as pursing a short payoff or short sale.