Combs Law Group

Has the Protection For Homeowners Changed Under the Arizona Anti-Deficiency Statutes?

Although there was much legislative and court activity in 2009, the “bottom line” is that the Arizona anti-deficiency statutes (primarily A.R.S. § 33-814 (G)) currently afford the same protection to homeowners that has existed since the enactment of the Arizona anti-deficiency statutes more than 30 years ago. (Note: the protection of the anti-deficiency statutes is only available if the home is a single-family or duplex, is on 2 ½ acres or less, and is utilized as a dwelling.) In the 2010 legislative session, however, the banking industry may sponsor legislation to amend the protection of the anti-deficiency statutes. One proposed amendment currently being discussed … Read more >

Can a Lender Sue Borrower On a Loan Secured By the Home?

If a loan was used to purchase the home, the loan is a non-recourse loan. In other words, the homeowner has no personal liability for the loan, unless there is excessive damage such as vandalism or flooding, i.e., “waste” to the home. Therefore, the lender’s only recourse after loan default is to foreclose on the home, and the lender cannot waive foreclosure and sue to collect the amount of the loan. If, however, the loan was not used to purchase the home, e.g., a home equity line of credit (“HELOC”), the lender can waive foreclosure and sue to collect on the amount of the loan. For example, if the homeowner after purchasing the home borrows … Read more >

When Will a Second Mortgage Loan Foreclose?

In the current real estate market a second mortgage loan, whether a purchase money loan or a non-purchase money loan such as a HELOC, will never foreclose. The reasons are that, one, the second mortgage lender may then have to pay off the first mortgage loan or lose the property to foreclosure; two, there is generally no equity in most homes subject to foreclosure in this current real estate market; and, three, the second mortgage lender would not be able to pursue any deficiency claim against the owner of the home after the foreclosure. (In prior “boom” years, however, a second mortgage lender would occasionally foreclose on the home, and try to … Read more >

When is a Deficiency Allowed After Foreclosure of a Home?

If there is a foreclosure of the home by the lender, whether the loan was a purchase money loan, i.e., a loan used to buy the home, or the loan was a HELOC or other non-purchase money loan, the lender will generally not have a claim for deficiency against the homeowner.

This protection applies even if the homeowner is an investor or a homebuilder. In interpreting the Arizona anti-deficiency statutes the Arizona appellate courts have consistently ruled that, while the intent of the legislature in originally passing the anti-deficiency statutes may have been to provide for protection only for primary residences… Read more >

What Protection Does a Homeowner have if the Loan That Was Used to Purchase the Home is Refinanced?

If there is a refinancing of the original purchase money loan on the home, the anti-deficiency statutes will still protect the homeowner from a deficiency after foreclosure of the refinancing loan. If, however, there is a “cash out” refinancing, i.e., at the time of refinancing the original purchase money loan is paid off and the homeowner receives additional cash, the law at this time is not clear, especially if the “cash out” was not used to improve the home. For example, if the homeowner buys the home with a $100,000 loan and three years later refinances with a $150,000 loan and takes $50,000 “cash out” and buys a boat … Read more >

When is the Homeowner Liable After a Short Sale For the Short Sale Difference?

If the home is “upside down” and the lender approves a short sale by the seller, the short sale “difference” (not technically a “deficiency” that occurs after foreclosure) is waived by the lender after the lender releases the loan in order for the seller to close the short sale to the buyer, unless the seller agrees to the lender’s requirement to pay back the short sale difference. An example is a home worth $60,000 and the loan is in the amount of $100,000. The lender approves a short sale of $60,000 to a buyer; the short sale difference is then $40,000. After the lender releases the loan and the short sale to the buyer closes … Read more >