California Real Estate SalespersonFinancingMedium
A lender forecloses on a deed of trust through a nonjudicial trustee's sale after the borrower defaults on a purchase-money loan. If the sale proceeds are insufficient to cover the full debt, what can the lender do under California law?
- ASue the borrower for the deficiency in a separate civil action
- BGarnish the borrower's wages without filing suit
- CNot pursue a deficiency judgment because it is barred after a nonjudicial sale
- DObtain a deficiency judgment automatically as part of the trustee's sale
Show answer & explanationAnswer & explanation
Correct answer: C. Not pursue a deficiency judgment because it is barred after a nonjudicial sale
Under California Code of Civil Procedure Section 580d, a lender who forecloses nonjudicially through a trustee's sale waives any right to seek a deficiency judgment against the borrower.
Why the other options are wrong
- A. California law specifically bars deficiency actions following nonjudicial foreclosure.
- B. Wage garnishment would require a judgment, which is barred in this scenario.
- D. Deficiency judgments are not granted through the trustee's sale process at all.
Antideficiency Rule (CCP 580d)
California law prohibits lenders from obtaining a deficiency judgment against a borrower after a nonjudicial trustee's sale foreclosure.
- Applies to nonjudicial (trustee's sale) foreclosures
- Judicial foreclosure may allow deficiency unless it's a purchase-money loan (CCP 580b)
- Encourages lenders to use trustee's sale process, forgoing deficiency rights
Memory trick: Trustee's sale = trade deficiency rights for speed.