i. What happens to the other liens when one lien forecloses?

When a lien is foreclosed, this wipes out all junior liens but does not affect liens, which are senior to the one being foreclosed. As the Court of Appeal said, “A valid foreclosure terminates all interests in the real estate junior to the mortgage being foreclosed (see, e.g., Sumitomo Bank v. Davis (1992) 4 Cal.App.4th 1306, 1314, 6 Cal.Rptr.2d 381), but it does not terminate interests senior to the mortgage. (See, e.g., R-Ranch Markets # 2, Inc. v. Old Stone Bank (1993) 16 Cal.App.4th 1323, 1327, 21 Cal.Rptr.2d 21.” Vallely Investments, L.P. v. BancAmerica Commercial Corp. (2001) 88 Cal. App. 4th 816, 824.

Thus, when a junior lien forecloses, the party who buys the property at the foreclosure sale acquires the property, with the senior liens still against it. When a senior lien forecloses, however, the buyer takes the property free and clear of all previously existing junior liens.

ii. Can a sold-out junior lender sue the borrower on its note?

If a senior lien forecloses on a property, this wipes out the mortgage or deed of trust of all junior lien-holders. Can those sold-out junior lien-holders now sue the borrower under their note? The general answer is “yes”, a sold-out junior mortgage holder can sue under the note after its lien is wiped out by the foreclosure by the senior. National Enterprises, Inc. v. Woods (2001) 94 Cal. App. 4th 1217.