Mortgage Anti-Deficiency Law Change - Update 8-15-09

Dear Friends,

Here is my second mortgage anti-deficiency statute update (and my third BLOG post on this subject). Again, if you are an Arizona real estate investor or know one, or a seasonal owner, there has been a very important development in the Anti-Deficiency Statute in Arizona.

Anti-Deficiency is where banks are prohibited from coming after a homeowner for the difference between the property's sale price and what is owed on the mortgage when the property is foreclosed (short sales do not qualify for this protection). With so many homes upside down these days (worth less than the mortgage balance owed), this is an important safeguard.

That safeguard was taken away unless the owner has spent 6 consective months "utliizing" the house. This was in a Bill passed this year and signed by the Governor which goes into effect on Sept 30th.

This means that investors or seasonal owners, if they were foreclosed on, could have banks coming after them for the difference in the mortgage balance and what the house sold for. These days that can easily be many tens of thousands of dollars.

The problem is that regular legislative session has adjourned for the year. The legislators are in special session now but are restricted to working on the state budget exclusively.

The good news is that language repealing the Anti-Deficiency law change (correcting the problem) has been added to two of the budget Bills currently in the legislature. So far, the legisiature has been unable to agree on a budget that won't be vetoed by the Governor. They are still working on getting that done and have a legislative vote scheduled for this coming week to get these bills through and to the Governor.

So we are still in a waiting game. It's not that the legislature is particularly opposed to repealing the changes, it's that the only vehicle to do that now is one or more of the budget Bills still being considered.

I'll update you when the Budget Bills are reported out of the legislature and the Governor has taken action on them. That will tell the tale on where we stand.

Please pass this on to any Arizona real estate investors and winter visitor owners that you know.

Thanks.

Richard