New Law Regarding Arizona Anti-Deficiency Judgments
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Arizona's anti-deficiency statue prohibits a lender from recovering against borrowers assets, such as automobiles and bank accounts, after the lender forecloses on the borrower's residence. However, the type of loan and type of residence are key factors in determining whether this statute applies.
The requirements under the new law are as follows: single family homes or duplexes on 2.5 acres or less; must be utilized for dwelling purposes (occupied or partially occupied); and construction has to be completed on the property (not under construction). If the requirements do not meet the above standards then the property does not qualify under the anti-deficiency statue.
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.
Let's talk about "recourse" loans verses "non-recourse" loans. A loan is "recourse" if the borrower or homeowner is personally liable for the entire amount due even after the home is foreclosed. A lender can pursue for the deficiency after foreclosure including a judgment or a lawsuit.
The other factor addressed in the Arizona anti-deficiency status is the type of loan. Loans are weighed as "recourse" or "non-recourse". If the homeowner or investor is responsible for the entire debt or lien after a trustee sale, this would be considered a "recourse" loan. The banks could then pursue several avenues against the homeowner to recoup the debt.
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.
A "purchase money" loan would also be considered a "non-recourse" loan. This is a 1st position loan and the entire loan was established and secured a Deed of Trust at the time of initial ownership.
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 requirements under the new law are as follows: single family homes or duplexes on 2.5 acres or less; must be utilized for dwelling purposes (occupied or partially occupied); and construction has to be completed on the property (not under construction). If the requirements do not meet the above standards then the property does not qualify under the anti-deficiency statue.
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.
Let's talk about "recourse" loans verses "non-recourse" loans. A loan is "recourse" if the borrower or homeowner is personally liable for the entire amount due even after the home is foreclosed. A lender can pursue for the deficiency after foreclosure including a judgment or a lawsuit.
The other factor addressed in the Arizona anti-deficiency status is the type of loan. Loans are weighed as "recourse" or "non-recourse". If the homeowner or investor is responsible for the entire debt or lien after a trustee sale, this would be considered a "recourse" loan. The banks could then pursue several avenues against the homeowner to recoup the debt.
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.
A "purchase money" loan would also be considered a "non-recourse" loan. This is a 1st position loan and the entire loan was established and secured a Deed of Trust at the time of initial ownership.
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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