I think you must be careful with your plan, I would not advise this course of action if I would giving actual legal advice because you are opening the can of worms. While there might, I emphasized, might be a way to make this work where in CA, you are running the risk, and so is he, of the house still going into foreclosure, and his rights as would be foreclosed along with your at any foreclosure sale. One of the other issue you will face is the due on sale clause, not that you might actually be "selling" it to him, but you are trying to gain the same results by another name through contract. The issue here is the potential to fail. I think while your plan may be possible with good legal advice and drafting, it is not recommended.
This answer is a free service to you, and the general public based on limited facts specific only to your issue, and may not apply in every situation. To assure that your situation does not differ from the answer provided above, you should immediately consult a licensed attorney in your state with all the relevant facts and details regarding your specific concerns. Please note, this forum is not a place to communicate all the details, as this forum is public and it could limit your rights in the future. This is not an opinion under the Government Regulations contained in IRS Circular 230, which regulate written opinions about Federal tax matters. This is not such a written opinion, it is an other written communication, and was not written to be relied upon, by itself, to avoid any tax penalties. In order to receive assurances of protection from tax penalties from a written communication, you should get an opinion letter. If you would like to discuss an opinion letter relating to any matter, please contact me and I will explain what is involved and what it will cost.
Your contractor will probably demand title to the property (or at least a portion of it) as consideration for his investment. You can make him a tenant in common with you, or you can transfer the property to an LLC or other holding company which you and the contractor run. A power of attorney is not advisable. Whichever option you choose (and there are others), you need a good contract.
A property can be sold at any point prior to the actual foreclosure sale but to remove the mortgage lien it would need to be paid by the buyer.
LLC (limited liability company) Credit Lien Property Buyer's rights in property sales Real estate buy and sell agreements Property title Real estate finances Foreclosure Avoiding property foreclosure Short sales Home mortgage Real estate Real property ownership Power of attorney Purchasing a house