COMPLETION GUARANTY

Exhibit 10.2

COMPLETION GUARANTY

THIS COMPLETION GUARANTY (“Guaranty”) is made as of January 30, 2007, by JOHN K. ANDERSON, individually and with LOIS A. ANDERSON, as co-trustees of THE ANDERSON FAMILY TRUST dated February 28, 2001 (“Anderson”), WILLIAM A. SILVA, individually and with KRISANTA K. L. SILVA, as co-trustees of THE SILVA FAMILY TRUST dated April 7, 2000 (“William Sylva”), MARILYN J. SILVA, individually and as sole trustee of THE MARILYN J. SILVA LIVING TRUST dated April 22, 1991 (“Marilyn Silva”), WOODMAN DEVELOPMENT COMPANY, LLC, a California limited liability company (“Woodman LLC”), and WOODMAN DEVELOPMENT COMPANY, INC., a California corporation (Woodman Inc.” and, together with Anderson, William Silva, Marilyn Silva and Woodman LLC, collectively, “Woodman”), and LYON EAST GARRISON COMPANY I, LLC, a California limited liability company (“Lyon East Garrison”), and WILLIAM LYON HOMES, INC., a California corporation (“Lyon Homes” and, together with Lyon East Garrison, collectively, “Lyon”; and Lyon and Woodman are collectively referred to herein as “Guarantor”), in favor of RESIDENTIAL FUNDING COMPANY, a Delaware limited liability company (“Lender”).

R E C I T A L S:

A. Lender has made a revolving loan in the principal amount of Seventy-Five Million Dollars ($75,000,000) (the “Loan”) to East Garrison Partners I, LLC, a California limited liability company (“Borrower”), pursuant to the terms of a Loan Agreement dated of even date herewith (as amended, renewed, replaced or otherwise modified from time to time, the “Loan Agreement”) between the Lender and the Borrower. The Loan is being made to finance (i) Borrower’s acquisition of certain real property located in Monterey County, California (the “Land”), and (ii) the performance by Borrower upon the Land of certain development work (the Land, together with the improvements, is referred to in this Guaranty as the “Project”).

B. The Loan is evidenced by a Revolving Promissory Note dated of even date herewith from Borrower to Lender (as amended, renewed, replaced or otherwise modified from time to time, the “Note”) and is secured, among other security, by a certain Construction Deed of Trust, Security Agreement and Fixture Filing With Assignment of Rents, Proceeds and Agreements dated of even date herewith (as amended or otherwise modified from time to time, the “Security Instrument”) made by Borrower in favor of Lender.

C. Guarantor has a substantial interest in Borrower and will derive benefit from the Loan.

D. As a condition to making the Loan, Lender has required that Guarantor execute and deliver this Guaranty.

E. To induce Lender to make the Loan and make disbursements under the Loan Agreement, and to accept the Note, the Loan Agreement and the Security Instrument, Guarantor has agreed to give this Guaranty.

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AGREEMENT:

NOW, THEREFORE, to induce Lender to enter into the Loan Agreement and to make the Loan, and in consideration thereof, Guarantor agrees as follows:

Section 1 Defined Terms

Unless otherwise defined in this Guaranty, all capitalized terms used in this Guaranty have the meanings ascribed to those terms in the Loan Agreement.

Section 2 Guaranty

(a) Guarantor absolutely and unconditionally guarantees the Completion of the Applicable Development Work (as defined below) at the times and subject to the terms and conditions set forth in the Loan Agreement (such obligation of Guarantor is referred to in this Guaranty as the “Completion Obligation”). As used in this Guaranty, “Completion of the Applicable Development Work” means that the following conditions are satisfied with respect to (i) all Development Work described in the Phase Commitment for Phase 1, (ii) all Development Work described in each other Phase Commitment, if any, executed and delivered by Lender, (iii) all Development Work (x) for which Lender has disbursed Loan proceeds or (y) for which Loan proceeds have been budgeted pursuant to a Phase Commitment executed and delivered by Lender, (iv) if Development Work has been commenced in a Phase, which Development Work was not described in a Phase Commitment executed and delivered by Lender, then all Development Work and any and all other work, including, without limitation, any and all on site or off site infrastructure work, that must be completed with respect to such Phase so there is no restriction on the ability of Borrower to sell and close escrow on the sale of all Lots in such Phase, and (v) all other Development Work, including, without limitation, any and all on-site or off-site infrastructure work, that must be completed so there is no restriction on (x) the ability of Borrower to sell and close escrow on the sale of all Lots (A) described in each Phase Commitment executed and delivered by Lender, or (B) included in any Phase with respect to which Borrower or any Guarantor commenced Development Work, or (y) the issuance of a building permit for each Home to be constructed on a Lot:

(1) all of the Development Work has been performed and completed (i) in a good and workerlike manner in accordance with all applicable laws, rules, regulations, ordinances and other applicable governmental requirements and private restrictions, including all Hazardous Materials Laws, and (ii) in accordance with the Plans and Specifications furnished to Lender by Borrower pursuant to the terms of the Loan Agreement, without substantial deviation therefrom;

(2) the Development Work is diligently pursued by Guarantor to completion pursuant to a revised Construction Progress Schedule approved by Lender in the exercise of its reasonable discretion, with respect to which Construction Progress Schedule Lender shall not withhold approval solely because it fails to require Guarantor to remedy any delay in the progress of the Development Work that may have existed at the time Lender delivered to Guarantor the notice described in Section 3(a) ;

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(3) all notices of completion have been filed and all statutory lien periods have expired;

(4) all costs of acquiring and performing the Development Work as required by the Loan Agreement have been paid;

(5) final lien waivers have been obtained from all contractors performing work at the Project; and

(6) the Development Work has been completed in accordance with all applicable Hazardous Materials Laws, which obligation includes the obligation to ensure that (i) the Development Work and the Project are free and clear of Hazardous Materials and Hazardous Materials Claims, (ii) remedial work, that may have been required has been completed in accordance with all Hazardous Materials Laws and with any written plan for the remedial work approved by any public agencies having jurisdiction, and (iii) all costs and expenses of the foregoing have been paid in full, including any fines or penalties imposed in connection with any required remedial work and the costs of testing or monitoring resulting from any such remedial work or the existence at any time of Hazardous Materials on, under or about the Project.

(b) In addition, Guarantor agrees to pay all costs and expenses incurred by Lender, including reasonable attorneys’ and paralegals’ fees, court costs and all other litigation expenses (including reasonable expert witness fees, exhibit preparation, and courier, postage, communication and document copying expenses), in enforcing this Guaranty (the Completion Obligation, together with the obligations set forth in this Section 2(b) , are collectively referred to herein as the “Guaranteed Obligations”) and the obligations set forth in Section 4(a) are referred to herein as the “ Limited Guaranty Obligations ”). The Guaranteed Completion Obligations and the Limited Guaranty Obligations are collectively referred to herein as the “ Guaranteed Obligations .”

Section 3 Performance of Completion Obligations Upon Default by Borrower

(a) If Completion of the Applicable Development Work is not accomplished by Borrower in accordance with the Loan Documents, or if Lender takes possession of the Project as permitted under the Loan Documents before the Completion of the Applicable Development Work, then Guarantor, promptly upon receipt of written notice thereof from Lender, will perform its Completion Obligation. Guarantor will take whatever actions may be necessary to perform the Completion Obligation, including the following:

(1) diligently and expeditiously proceed to ensure the Completion of the Applicable Development Work, at Guarantor’s sole cost and expense, at the times and subject to the terms and conditions set forth in the Loan Agreement;

(2) fully pay and discharge all direct and indirect costs incurred or required to be incurred in connection with the Completion of the Applicable Development Work; provided, however, that Guarantor will be entitled to receive disbursements of the Loan in connection therewith pursuant and subject to the conditions set forth in the Loan Agreement as more fully described in subsection (b) below;

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(3) pay any amounts necessary to release and discharge any mechanics’, material providers’ or other liens that may exist or come into existence in connection with the Completion of the Applicable Development Work, or in the alternative contest the same subject to the terms and conditions set forth in the Loan Agreement; and

(4) perform or procure performance of compliance with the obligations set forth in clause (6) of Section 2(a) and pay such amounts as may become payable in connection therewith.

(b) If Lender calls upon Guarantor to perform its Completion Obligation pursuant to the terms of subsection (a) above, then Guarantor will have the right to receive disbursements of the Loan, and disbursements of the Loan shall be made to pay interest accrued on the Loan in accordance with the Interest Reserve provisions set forth in Section 2.6(c) of the Loan Agreement, subject to the following terms and conditions:

(1) Lender will be under no obligation to disburse proceeds of the Loan to the Guarantor unless Guarantor has cured every Event of Default and Potential Default by Borrower, including Events of Default relating to failure of Borrower to pay principal, interest, fees and/or expenses of the Lender relating to the Loan that are required to be paid by Borrower pursuant to the Loan Agreement or any other Loan Document; provided, however, that Guarantor shall not be obligated to cure any failure by Borrower solely to comply with Section 1.1(b), 2.8(2), 2.8(3) or 2.8(5) of the Loan Agreement.

(2) Lender will be under no obligation to disburse proceeds of the Loan to Guarantor if Guarantor is in default under any of the Loan Documents;

(3) Lender will be under no obligation to disburse proceeds of the Loan to Guarantor if receipt of such amounts by Guarantor is prohibited by law or by any process, order or judgment of any court binding on Lender; and

(4) proceeds of the Loan will be disbursed to Guarantor only pursuant and subject to the terms and conditions of the Loan Agreement.

Guarantor acknowledges that the Completion Obligation of Guarantor hereunder is a joint and several obligation. Guarantor expressly grants to Douglas F. Bauer and Richard S. Robinson, either acting alone, of Lyon and William A. Silva of Woodman (which names may be changed pursuant to Section 14 from the applicable Guarantor) (collectively, the “Guarantor Representatives”) the right to issue jointly all notices and to receive all disbursements of the Loan under this Section 3(b) regarding the Completion of the Applicable Development Work; provided, however, that if the Guarantor Representatives give conflicting instructions or if any Guarantor makes a request or demand of Lender with respect to this Section 3(b) that Lender perceives to conflict or be inconsistent with a request or demand with respect to this Section 3(b) made by the Guarantor Representatives, then Lender may require, as a condition to (x) permitting the Guarantor Representatives to procure the Completion of the Applicable Development Work under this Section 3(b) , or (y) making disbursements of the Loan under this Section 3(b) , that each Guarantor concur in writing with the logistics of the Completion of the Applicable Development Work and/or with the requested disbursement of Loan proceeds

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hereunder, as Lender may require, and in the absence of such joint request or concurrence, or if Lender is given conflicting requests, Lender may decide, in its sole and absolute discretion, whether and to what extent (1) to permit any Guarantor, which Lender may select in its sole and absolute discretion, to procure the Completion of the Applicable Development Work, or (2) to advance funds to such Guarantor in respect of the performance of the Completion of the Applicable Development Work; provided further, however, that Lender shall follow the requests and instructions of a single Guarantor if such Guarantor is so designated in a final binding arbitration ruling, non-appealable judicial determination or other procedure satisfactory to Lender. Lender shall not be obligated to permit any Guarantor to procure the Completion of the Applicable Development Work to the extent any other Guarantor procures the Completion of the Applicable Development Work. Lender shall not be obligated to make disbursements of the Loan to any Guarantor to the extent disbursements are made to any other Guarantor under this Guaranty.

(c) Guarantor’s obligations under this Guaranty will remain in full force and effect regardless of whether the Guarantor or any other Person determines that Completion of the Applicable Development Work is impossible. For purposes of this Guaranty, “impossibility” which impossibility includes the following matters: (i) a casualty that affects, or discovery of unanticipated, soils conditions, or (ii) Laws and Regulations or court orders applicable to the Project, or (iii) other events or circumstances beyond the control of Borrower or Guarantor relating to the Project (but specifically excluding lack of funds or other monetary considerations or any other events, circumstances or constraints affecting Borrower, Guarantor or another Person as opposed to the Project). In such an event, Guarantor will immediately notify Lender in writing of the event and, in lieu of accomplishing Completion of the Applicable Development Work as required pursuant to Section 3(a)(1) above, Guarantor will pay to Lender an amount equal to the Impossibility In-Lieu Payment (as defined below) immediately upon written notice from Lender.

As used herein, “Impossibility In-Lieu Payment” means an amount equal to the result obtained by subtracting the “as-is” value of the Project (to the extent that any Development Work has been performed) on a bulk sale basis from the lesser of (x) the outstanding principal balance of the Loan, or (y) the “as-if completed” value of the Project on a bulk sale basis (assuming that the impossibility precluding Completion of the Applicable Development Work did not exist), based on an Appraisal Report paid for by Guarantor. In no event, however, shall the Impossibility In-Lieu Payment be less than zero.

Section 4 Limited Guaranty of Payment

(a) In addition to the Guaranteed Completion Obligations, from and after the occurrence of any of the following events, Guarantor hereby unconditionally and irrevocably guarantees to Lender (i) the full and prompt payment of the principal sum of the obligations of Borrower under the Loan Documents (the “ Borrower Obligations ”) in accordance with the terms of the Loan Documents when due, by acceleration or otherwise, together with all interest and other charges accrued thereon pursuant to the Loan Documents and (ii) the full and prompt payment of all other Borrower Obligations and all other sums, together with interest accrued thereon, and the performance of all other Borrower Obligations, when due pursuant to the terms of the Loan Documents upon the occurrence of any of the following; provided, however, that

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with respect to the occurrence of the events described in clauses (1) through (6) of this Section 4(a) , Guarantor’s liability for payment shall be limited to all damages or loss, cost or expense incurred by Lender, including reasonable attorneys’ and paralegals’ fees, court costs and all other reasonable litigation expenses (including expert witness fees, exhibit preparation, and courier, postage, communication and document copying expenses) in enforcing this Guaranty, arising therefrom:

(1) the misapplication or misappropriation by Borrower of any or all money collected, paid or received, or to which Borrower is entitled, relating to the Loan or the Project, including, but not limited to, insurance proceeds, condemnation awards, lease security and other deposits and rent;

(2) rents, issues, profits and revenues of all or any portion of the Project received or applicable to a period after the occurrence of any Event of Default or after any event which, with the giving of notice and/or the passage of time, would constitute an Event of Default under the Loan Documents, which are not applied to pay, first, (a) real estate taxes and other charges which, if unpaid, could result in liens superior to that of the Deed of Trust, and (b) premiums on insurance policies required under the Loan Documents and, second, the other ordinary and necessary expenses of owning and operating the Land and of performing the Development Work and/or to sums due under the Loan Documents;

(3) waste committed on, or damage to the Project as a result of intentional misconduct or gross negligence or the removal of all or any portion of the Project in violation of the terms of the Loan Documents;

(4) fraud, material misrepresentation or the intentional or grossly negligent failure to disclose a material fact by Borrower or any of its principals, officers, general partners, managers or members, any guarantor or any agent, employee or other person authorized or apparently authorized to make statements, representations or disclosures on behalf of any such person;

(5) Borrower fails to obtain Lender’s prior written consent to any subordinate financing or other voluntary lien encumbering the Project;

(6) Borrower fails to obtain Lender’s prior written consent to any assignment, transfer or conveyance of the Project or any portion thereof or any interest therein or directly or indirectly in Borrower as required by the Loan Documents; and/or

(7) a Bankruptcy Trigger Event.

As used in this Section 4(a) , the term “ Bankruptcy Trigger Event ” shall mean the occurrence of any of the following:

(A) Borrower files a voluntary petition under Title 11 of the United States Code (the “ Bankruptcy Code ”) or any other federal or any state bankruptcy or insolvency law;

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(B) any Affiliate, officer, director or representative which controls, directly or indirectly, Borrower files, or joins in the filing of, an involuntary petition against Borrower under the Bankruptcy Code or any other federal or any state bankruptcy or insolvency law, or solicits or causes to be solicited petitioning creditors for any involuntary petition against Borrower from any Person;

(C) Borrower files an answer consenting to, or otherwise acquiescing in, or joining in, any involuntary petition filed against it by any other Person under the Bankruptcy Code or any other federal or any state bankruptcy or insolvency law, or solicits or causes to be solicited petitioning creditors for any involuntary petition from any Person;

(D) any Affiliate, officer, director or representative which controls Borrower consents to, or acquiesces in, or joins in, an application for the appointment of a custodian, receiver, trustee, or examiner for Borrower or any portion of the Project; or

(E) Borrower makes an assignment for the benefit of creditors or admits, in writing or in any legal proceeding, its insolvency or inability to pay its debts as they become due.

No provision in this Guaranty or in any of the Other Loan Documents shall be deemed a waiver by Lender of any right which Lender may have under Section 506(a), 506(b), 1111(b) or any other provisions of the Bankruptcy Code to file a claim for the full amount of the Borrower Obligations or to require that all collateral shall continue to secure all of the Borrower Obligations owing to Lender in accordance with the Loan Documents.

(b) All payments under this Agreement shall be made to Lender in lawful money of the United States of America at the address of Lender at the beginning of this Agreement or such other location as Lender may designate in writing. Any amount payable under this Agreement not paid when due and any judgment for such an amount and interest thereon shall bear interest at the Default Rate from the due date or such judgment date, respectively, until such amount and interest thereon are paid in full. Guarantor agrees to pay such interest on demand. All Guaranteed Obligations will be paid and performed by Guarantor without counterclaim, deduction, defense, deferment, reduction, or setoff.

Section 5 Guaranty Absolute

(a) The liability of Guarantor with respect to the Guaranteed Obligations is absolute and unconditional according to the terms of the Loan Documents, irrespective of any of the following:

(1) any lack of validity or enforceability of any of the Loan Documents, or any other agreement or instrument relating thereto;

(2) any change in the time, manner or place of payment of, or in any other term of, any of the Guaranteed Obligations;

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(3) any amendment to, waiver of, or consent to departure from, any of the Loan Documents, including changes in the terms of disbursement of the Loan proceeds or repayment thereof, modification to the Project, modifications, extensions (including extensions beyond and after the Maturity Date) or renewals of payment dates, changes in interest rate or the advancement of additional funds by Lender in its discretion;

(4) any exchange, release or nonperfection of any collateral, or any release or amendment or waiver of or consent to departure from any other guaranty, for any of the Guaranteed Obligations; or

(5) any other circumstance that might otherwise constitute a defense available to, or a discharge of, Borrower in respect of the Guaranteed Obligations or Guarantor in respect of this Guaranty.

(b) Notwithstanding any termination of this Guaranty or the cancellation of the Note or any other agreement evidencing the Guaranteed Obligations, if any payment or performance of any of the Guaranteed Obligations (from any source) is rescinded, repaid or must otherwise be returned by Lender (i) due to or upon the insolvency, bankruptcy or reorganization of Borrower or Guarantor, or (ii) for any other circumstance, this Guaranty will continue to be effective or be reinstated, as the case may be, all as though such payment had not been made.

Section 6 Subrogation; Subordination

Guarantor will not exercise any rights that it may acquire by way of subrogation under this Guaranty, by virtue of any payment made hereunder or otherwise, until all the Guaranteed Obligations have been paid or performed in full. For the purposes hereof, the Guaranteed Obligations will not be deemed to be “paid or performed in full” until the expiration of two years and one day (without the filing of any bankruptcy, dissolution, reorganization, or insolvency proceedings by or against Guarantor or Borrower during such period) after such payment and/or performance. If any amount is paid to Guarantor on account of such subrogation rights before the Guaranteed Obligations have been paid or performed in full, the amount will be held in trust for the benefit of Lender and will immediately be paid to Lender to be credited and applied upon the Guaranteed Obligations, whether matured or unmatured, in such order as Lender, in its sole and absolute discretion, determines. Until the Guaranteed Obligations are paid or performed in full, any indebtedness of Borrower now or hereafter held by Guarantor is hereby subordinated to the indebtedness of Borrower to Lender. Any such indebtedness of Borrower to Guarantor will, if Lender so requests, be collected, enforced and received by Guarantor as trustee for Lender and be paid over to Lender on account of the indebtedness of Borrower to Lender, but without reducing or limiting in any manner the liability of Guarantor under the other provisions of this Guaranty.

Section 7 Agreements of Guarantor

(a) The obligations under this Guaranty are independent of and in addition to the undertakings of Borrower pursuant to the Loan Documents, any evidence of indebtedness issued in connection therewith, any mortgage, deed of trust or security agreement given to secure the

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same, any other guaranties given in connection with the Loan and any other obligations of Guarantor to Lender;

(b) A separate action may be brought to enforce the provisions of this Guaranty, whether Borrower is a party in any such action or not;

(c) Lender may at any time, or from time to time, in its sole discretion, without any notice to or consent from Guarantor, take all or any of the following actions, without such actions in any way affecting this Guaranty:

(1) extend or change the time of payment and/or performance and/or the manner, place or terms of payment and/or performance of all or any of the Guaranteed Obligations;

(2) exchange, release and/or surrender all or any of the collateral security, or any part thereof, by whomsoever deposited, that is now or may hereafter be held by Lender in connection with all or any of the Guaranteed Obligations;

(3) sell and/or purchase all or any such collateral at public or private sale, or at any broker’s board, in the manner permitted by law and after giving any notice that may be required, and after deducting all costs and expenses of every kind for collection, sale or delivery, the net proceeds of any such sale may be applied by Lender upon all or any of the Guaranteed Obligations;

(4) settle or compromise with Borrower, and/or any other person liable thereon, any and all of the Guaranteed Obligations, and/or subordinate the payment of same, or any part thereof, to the payment of any other debts or claims, that may at any time be due or owing to Lender and/or any other person or corporation;

(5) accept additional security or guarantees of any kind;

(6) endorse, transfer or assign the Note and other Loan Documents to any other party;

(7) release Borrower or any maker, surety or other person liable for payment or performance of all or any part of the Guaranteed Obligations; or

(8) further loan monies or give or ex