While it is true that refinancing a purchase money loan (the loan you took out when you bought your home) recharacterizes it as a recourse loan, if you only have one loan you really dont need to worry about it even if you do a cash out refi. CA is a one action state so your lender gets one bite of the apple-they can pursue you for the deficiency through a costly/lengthly judicial foreclosure process and let you keep the house or they can foreclose. It would be very unusual for them to do anything other than foreclose. The real issue of recourse occurs on a sold-out junior lien which is a 2nd, 3rd etc mortgage that gets $0 after a foreclosure. This is one of the biggest reasons to pursue a short sale as you can get something for the 2nd thereby reducing the deficiency but more importantly negotiate with your lender to settle for some amount in exchange for them releasing you from the deficiency.
Disclaimer: I am not an attorney and even though I know this to be true in general, you situation may be different so its best to consult one if you are in this postiion.
