Arizona Anti-Deficiency Statutes
Just imagine buying a home and getting into financial trouble. You try to sell your home to no avail. So you decide to "wash your hands" and walk away. The home forecloses and all of sudden you're served a judgment to pay thousands of dollars. This is what the new Arizona's anti-deficiency statue addresses.
The law which takes effect September 30, 2009 prevents a bank from going after the borrowers assets, such as cars and bank accounts once the home is foreclosed upon. The statue addresses two major factors, the type of owner-occupancy and the type of loan. Based on these two type will determine if the law applies.
Investment properties have to be occupied by the person on title for a minimum of 6 months to qualify under the anti-deficiency statue. In other words the investor would not be liable for any deficiency arising out of the foreclosure or trustee sale. The banks or lien holders could not look for additional assets to satisfy the remaining debt after the trustee sale is complete.
The law addresses two types of loans: "recourse" and non-recourse". A bank or lender has "recourse" if the homeowner is liable for the entire amount due on all liens after the homes is foreclosed upon. That means the banks or lenders can aggressively pursue the homeowner for the unpaid debts through a judgment or lawsuit.
A bank or lender does not have recourse (non-recourse) other than to repossess the home. This is true when the requirements as stated above fall outside the laws parameters.
Typically, a first position "purchase money" loan is a non-recourse loan. In English, this means the loan on the home was originated at the time the home was purchased and the property was secured by a deed of trust.
An example of a recourse loan would be a home equity line of credit. The home was used as collateral but the loan was not originated when the borrower purchased the home.
A good analogy of a "recourse" loan would be a line of credit from the bank. The bank loaned the homeowner money and used their home as collateral. This loan was acquired AFTER a Deed of Trust was initially established. Therefore the bank could pursue a judgment or lawsuit against the homeowner. One of the main reasons this law was re-addressed after being in effect since 1990, was the 2nd mortgages that were being borrowed by the homeowners and the today's market value on a home is substantially less than what is owned of the 1st mortgage, meaning the 2nd is not getting a dime in return.
The law which takes effect September 30, 2009 prevents a bank from going after the borrowers assets, such as cars and bank accounts once the home is foreclosed upon. The statue addresses two major factors, the type of owner-occupancy and the type of loan. Based on these two type will determine if the law applies.
Investment properties have to be occupied by the person on title for a minimum of 6 months to qualify under the anti-deficiency statue. In other words the investor would not be liable for any deficiency arising out of the foreclosure or trustee sale. The banks or lien holders could not look for additional assets to satisfy the remaining debt after the trustee sale is complete.
The law addresses two types of loans: "recourse" and non-recourse". A bank or lender has "recourse" if the homeowner is liable for the entire amount due on all liens after the homes is foreclosed upon. That means the banks or lenders can aggressively pursue the homeowner for the unpaid debts through a judgment or lawsuit.
A bank or lender does not have recourse (non-recourse) other than to repossess the home. This is true when the requirements as stated above fall outside the laws parameters.
Typically, a first position "purchase money" loan is a non-recourse loan. In English, this means the loan on the home was originated at the time the home was purchased and the property was secured by a deed of trust.
An example of a recourse loan would be a home equity line of credit. The home was used as collateral but the loan was not originated when the borrower purchased the home.
A good analogy of a "recourse" loan would be a line of credit from the bank. The bank loaned the homeowner money and used their home as collateral. This loan was acquired AFTER a Deed of Trust was initially established. Therefore the bank could pursue a judgment or lawsuit against the homeowner. One of the main reasons this law was re-addressed after being in effect since 1990, was the 2nd mortgages that were being borrowed by the homeowners and the today's market value on a home is substantially less than what is owned of the 1st mortgage, meaning the 2nd is not getting a dime in return.
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