First, let me preface this by stating that I am not an attorney nor a legal expert. The following information is my opinion based on information given to me by mortgage professionals, and is not a legal opinion. Your best course to obtain legal advice is to speak with a qualified real estate attorney in your area. Now, having said that...
In California, a "purchase money loan" or loans used to purchase the home are considered "non-recourse" loans--meaning, if the home is foreclosed, then the bank may not seek recourse from the owner for the outstanding balance. Thus, if when you purchased the home, you needed both a first and a second loan to buy the home, then both are considered purchase money loans. However, if you purchase the home using one loan, and then got a second loan to help you cover the costs of updating, renovating or just paying for the first loan's monthly fees, then the second loan is NOT a purchase money loan and, as I understand it, is a recourse loan.
Again, speak with a mortgage professional and attorney for help in determining how you should handle the second loan.
Grace Morioka, SRES, e-Pro
Area Pro Realty