Consult with an attorney on this. Mike is not correct when it comes to the 2nd. John's answer is the one you should be considering.
There are certain 'case specific' facts in the State of California that might protect you from having to pay the 2nd. For example, if the loan was purchase money (in other words, it is the original loan on that house that allowed you to buy the house), then most likely you don't owe the money. However, you said it was a home equity loan, which usually means you borrowed the funds AFTER you bought the house. In this case, you would still owe the debt.
As John said, the lien (which is simply the pledge of collateral/security) is wiped out but not the note (the promise to repay). What the holder of the 2nd now has is an unsecured note, but they can still pursue you for payment. Take your specific facts to an attorney and get a free 15 or 30 minute consultation. If you owe the money, they will be able to advise you of your other options in this situation.
Sorry to hear you are going through this. Hang in there, but get some good advise this time.
Shel-lee Davis, QSCÂ®
Certified Distressed Property Expert â€“ CDPEÂ®
Short Sale & Foreclosure Resource â€“ SFRÂ®
Certified HAFA Specialist â€“ CHSÂ®
Your Real Estate Consultant for Life
RE/MAX Palos Verdes Realty