California Deficiency Judgments

California & Its One Action Rule

California law constrains a lender with an interested secured in real property (example: mortgage loan) to taking solely one action to enforce the debt. The one action rule states “There can be but one form of action for the recovery of any debt or the enforcement of any right secured by mortgage upon real property” (Cal. Code Civ. Proc. § 726(a)). This can be interpreted that a mortgage lender is only allowed to do one of the following:

• nonjudicial foreclosure (conduct a trustee’s sale)
• judicial foreclosure, or
• pursue the borrower personally through court action on the promissory note for the balance of the debt.

Consequently, this rule restricts a lender to bringing forward only one foreclosure proceeding or court action against a borrower who falls behind in mortgage payments.

If the first mortgage lender forecloses and you have a second or third mortgage, or a HELOC, in some circumstances you may face a lawsuit from one of those lenders.

In regards to subordinate mortgage liens under California law the lender can’t try to get a personal judgment against you if the loan was:

• a purchase money loan
• a refinance of a purchase-money loan
• a seller-financed loan