Up until Dec 31st 2012 I believe non-recourse protection only applied to purchase money loans; if the Seller ever refinanced during ownership non-recourse protection is gone.
Now, as of Jan 1, 2013 Senate Bill 1069 [ Cal. Code of Civ. Proc. Â§ 580b(c) ] kicks in whereby Homeowners who default on their refinance loans (one-to-four residential units) are protected against personal liability for any deficiency following foreclosure. The anti-deficiency protection, however, DOES NOT extend to any cash out in a refinance. This new law only applies to refinance loans or other credit transactions used to refinance a purchase money loan, or subsequent refinances of a purchase money loan, that are executed on or after January 1, 2013.
The federal Mortgage Debt Relief Act of 2007 allows taxpayers to exclude income from the discharge of debt on their PRINCIPAL residence. Debt reduced through mortgage restructuring, as well as mortgage debt forgiven in connection with a foreclosure, qualifies for the relief. This provision applies to debt forgiven in years 2007 through 2012.
However, as part of the "Fiscal Cliff" negotiations The American Tax Payer Relief Act of 2012 was passed by the US Congress January 1st of 2013 and is expected to be signed by the President. When it becomes law it will extend the Mortgage Debt Relief Act to January 1st of 2014.
The State of California has a similar law enacted April 12, 2010, SB 401, called the Conformity Act of 2010 covering January 1, 2009, and before January 1, 2013. As of this posting, I have not found a CA extension to 2014.