Under what condition does California law protect homeowners when the sale of the property cannot cover the outstanding mortgage balance?

California law only protects homeowners in the case of an original purchase mortgage loan, meaning the loan used to initially purchase the property. This means that any refinanced loans or mortgages taken out for other purposes may not be protected under California law. Additionally, declaring bankruptcy does not automatically trigger this protection for homeowners. Therefore, option B and C are incorrect. Option D is also incorrect as the type of mortgage can impact whether or not the homeowner is protected under California law, so this protection is not guaranteed regardless of the mortgage type.