New Changes to the Arizona Anti-Deficiency Statute: What It Means for Homeowners

The Arizona State legislature in conjunction with Governor Jan Brewer recently passed a new bill amending the Arizona Anti-Deficiency Statute. As explained in a previous article on the Pak & Moring site, this law had generally served to protect borrowers by prohibiting mortgage lenders from suing a homeowner for the difference between the amount the property sold for at a foreclosure auction and the amount owed to the lender. This statute only protects homeowners in certain circumstances. Generally, a homeowner may not be sued by his or her lender if the property in question is located on 2.5 acres or less and is a single family residence or duplex.  However, this statute only applies if the decrease in value is not due to the homeowner’s neglect.

The new law now requires that a homeowner must have “utilized” the property for six consecutive months and a certificate of occupancy must have been issued. This new requirement is primarily directed at non-resident investors; however, it could adversely affect Arizona investors.  Arizona residents who are living in their home as their primary residence and are facing foreclosure will still be protected under the new law.

This new requirement for the anti-deficiency law will go into effect on September 30, 2009, which could have significant ramifications on pending foreclosures and short sales.

Does my property qualify for the anti-deficiency statute?

  1. Is your home located on 2.5 acres of land or less?
  2. Is your home a dwelling for one or two families?
  3. Is your home fully built and have you received a certificate of occupancy?
  4. Do you live in the home and have you done so for 6 consecutive months?
  5. Was the decrease to the value of your property the fault of the market (as opposed to neglect on your behalf)?
  6. Was the mortgage(s) used for the original purchase of the home, or at the very least, for improvements made to the property?

If you answered yes to all of the above questions, you may still be able to protect yourself under Arizona’s anti-deficiency statute. Ii you meet the criteria under the new law, your lender may be prevented from pursuing you for its losses from the foreclosure. However, every situation is different. Your individual factors may affect the outcome of your foreclosure. To find out if you are protected under Arizona’s anti-deficiency statute, contact Pak & Moring to look into all of your legal options and discuss your pending or possible foreclosure.

(Please note: while informative, these posts are not intended to be formal legal advice and are not completely authoritative and should not be solely relied on as a primary basis for legal action.)

For a previous introduction and explanation of the Arizona Anti-Deficiency Statute, see thePak & Moring Blog

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