Can My Lender Sue for Deficiency in a Foreclosure in California?

In California we have certain coveted rules under what conditions can my lender sue for deficiency in a foreclosure. Generally, a lender in California has 2 options in order to sue on the note against the real estate itself; it can go through a judicial foreclosure or a non-judicial foreclosure process.

The former involves a full court process, which takes a long period of time and expense, along with certain borrower redemption rights to pay and redeem the property back (3 months if the award satisfied the amount due or 1 year if it did not). But the benefit for the lender here is that it can recover any deficiency in the award to the amout due the lender personally against the borrower.

The later (non-judicial foreclosure), is vastly more chosen by lenders in California, which takes a much shorter period of time and expense, whereby the property is sold at a trustee sale and the proceeds are delivered to the lender to satisfy the outstanding obligations. The other largest difference, generally, here is that the lender cannot recover any deficiency against the borrower personally.

But, as you will read below, the difference between judicial and non-judicial foreclosure really does NOT give the lender in California a deficiency right.

Below is a summary ("cheat sheet") of the general rules and some additions to those rules, for the benefit of borrowers in foreclosure and short sale in California as of the date of this post:

1. California has the One Action Rule, which states that there can be only one form of action against another to recover on any debt and any right secured by a loan upon real property.
2. There is no deficiency judgment allowed by a lender following a non-judicial foreclosure.
3. There is no deficiency judgment allowed by a lender when the loan is either a purchase money loan for an owner-occupied residential dwelling of 1 to 4 units OR seller carry-back financing.
4. NEW RELIEF as of January 1, 2013:  There is no deficiency judgment allowed on a refinance of a purchase money loan for an owner-occupied residential dwelling of 1 to 4 units made on or after January 1, 2013 (except for any cash-out portion of that refinance) as long as such refinance is used to directly pay off the previous purchase money loan with costs, fees and expenses of the refinance.
5. NEW RELIEF on Short Sales: There is no deficiency judgment allowed following a short sale for a residential dwelling of 1 to 4 units.
6. NEW RELIEF on Short Sales: A lender cannot require a borrower to pay any money as a condition to approving the short sale, unless those funds come from the proceeds of the sale.