California Real Estate Practice Exam

In the event of a default on the first trust deed, which of the following is true?

1. The bank could obtain a deficiency judgment against the father

2. The bank could obtain a deficiency judgment against the purchasers

3. The father could get a deficiency judgment against the purchasers on the 2nd trust deed

4. None of the above

The correct answer is: The bank could obtain a deficiency judgment against the father

In the context of a default on the first trust deed, if the bank forecloses on the property and the sale does not cover the full amount owed on the mortgage, the bank has the right to pursue a deficiency judgment against the borrower. This is applicable in scenarios where the loan is recourse, meaning the lender can pursue the borrower's other assets if the sale of the property does not satisfy the full debt. Therefore, should the father be the borrower and he defaults on the first trust deed, the bank could indeed obtain a deficiency judgment against him personally to recover the remaining balance owed. The option about the bank obtaining a deficiency judgment against the purchasers is not correct because that would imply the purchasers/defaulting parties are on the hook for the debt to the bank, which they are not if they did not sign the original loan agreement for the first trust deed. The option regarding the father obtaining a deficiency judgment against the purchasers on the second trust deed is also inaccurate since typically, a borrower cannot seek a deficiency judgment against other parties unless specified conditions are met, such as having recourse on such debts, which does not pertain here. Thus, the assertion that the bank could obtain a deficiency judgment against the father stands accurate within the given legal framework