Arizona Anti-Deficiency Statute Update

Dear Friends,

Here is a mortgage anti-deficiency statute update I promised.

If you are an Arizona real estate investor or know one, or a seasonal visitor who owns a home here, there has been a very important development in the Anti-Deficiency Statute in Arizona you should be aware of.

To reiterate, 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.

The new law, effective September 30th, will take away the anti-deficiency protection unless the owner has “utilized” (lived in) the property for 6 consecutive months and has a Certificate of Occupancy. Many winter visitors or small investors can’t meet these conditions. If they get into mortgage trouble and are foreclosed on, they could find themselves with the bank coming after them for any deficiency (usually tens of thousands of dollars) that might have dire consequences financially.

I attended a meeting on Tuesday at the State Legislature chaired by the State Senator who sponsored the legislation changing the anti-deficiency law. It lasted for 1 1/2 hours with Realtors, attorneys and the bankers represented.

At the end of the meeting, it was evident that this new law had so many unintended consequences for our seasonal visitors and mom and pop investors that the Bill's sponsor announced that it should be repealed and revisited next legislative session.

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 Governor has been approached to include this Bill in what she has authorized for the special session but so far she has not agreed to do so.

With all the interest generated this past Tuesday, this is most likely not over. But for now, we have this new law on the books scheduled to go into effect on September 30th.
I will send you any new developments as they occur.

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

Be sure to contact your state legislators immediately and tell them you want this law changed or at least held in abeyance until it can be revisited during next year’s legislative session. The names, phone numbers and email addresses for State Senators and Representatives can be found at www.azleg.gov.

Richard

Winter Visitor and Investor Mortgage Protections Changing

Dear Friends,

We have had a change to borrowers mortgage protections in Arizona. This is still a fluid situation but unless the Legislature can effect a change, the new law will go into effect on September 30, 2009.

Arizona's mortgage anti-deficiency statute protects homeowners if their home is forclosed on by a bank and the foreclosure sale price is less than what is owed on the mortgage. The bank or lending institution is prohibited from coming after the homeowner for the difference between what was owed on the mortgage and the foreclosed sale price.

As of September 30th, this will change. On that date a change in the law will require that the owner have lived in the house for at least 6 continuous months and have a Certificate of Occupancy in order to receive anti-deficiency protection. While this change (sponsored by banks and other lenders) was aimed primarily at investors, it will affect seasonal and second home owners who are here for less than 6 consecutive months.

The Arizona Association of Realtors is working to get this law changed while the Leglislative Special Session is still ongoing.

I am going to a legislative meeting tomorrow at the Capitol to see if something can be worked out. I'll report the results of that meeting in this blog later in the week.

Meanwhile if you know any investors or seasonal visitors who are in mortgage trouble, let them know about this change or have them call me at 602-370-1450 for additional details.

Thank you.

Richard