Foreclosure Laws You Need To Know


The news media is reporting that we may face a second round of foreclosures in the next few months.

For those facing foreclosure, it is vital to act early and to know their options.

Even though funds may be tight, it is imperative that a consultation with an attorney is the first step to avoid mistakes that have proved costly for others.

Arizona has laws that protect Arizona homeowners from anti-deficiency judgments if the property and the loan meet certain criteria.

Anti-deficiency means that if the foreclosure or trustee’s sale brings in less than the amount owed, the lender cannot pursue the homeowner for the difference between the sale price and the amount owed. If you wish to look up the anti-deficiency laws, they are Arizona statutes 33-729 and 33-814.

The general criteria for the home to qualify for the anti-deficiency statutes are: the dwelling must be on two-and-one-half acres or less and utilized as a one-family or single two-family dwelling.

Properties qualify whether they are primary residences, secondary homes or even if they are rented to third parties.

The mortgages must also be a purchase money mortgage. A purchase money mortgage is also considered a deed of trust.

Home equity loans will not qualify for protection under the anti-deficiency laws. In addition, if you refinanced your home and took out extra capital, it may not qualify for protection under the anti-deficiency laws.

Lastly, to be protected by the anti-deficiency laws, the property must not have any diminution in value due to voluntary waste committed by the debtor. In other words, do not trash the property because you may be angry over the circumstances.

One other point, VA loans are not subject to the anti-deficiency statutes and FHA loans may not protected by Arizona’s anti-deficiency laws.

Caution should be taken if one is contemplating a short sale arrangement with your lender. It has been reported that some lenders are inserting clauses into the short sale agreement that circumvent the anti-deficiency laws. By signing such an agreement, the homeowner may be liable for thousands or tens of thousands of dollars after the short sale is completed.

The above is condensed information to consider, but other options may be available. The above information was gathered from sources deemed reliable but not guaranteed. No action should be taken without the benefit of legal consul as the law is far more complicated than outlined above.

Ray Pugel is a designated broker for Coldwell Bishop Realty. Contact him at (928) 474-2216.


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