SB 1271 Arizona Anti Deficiency Law Repealed!!!
SB 1271 has been repealed!!
Today, Sept. 4 2009 at 1:20pm Governor Brewer signed HB 2008 which repeals SB 1271 and it’s changes to the Arizona anti-deficiency statute.
The anti-deficiency statute will (for now) remain in favor of Arizona homeowners! If you own property in the state of Arizona and it’s on less than 2.5 acres and is a single family dwelling or a duplex then your lender is unable to pursue you for any deficiency for purchase money mortgages!!
YES, THIS MEANS RESIDENTIAL INVESTMENT PROPERTY AS WELL!!!!!!!!!!!!!!!!
What does this mean to me? Lots!!
1. Arizona Short sale approvals should start flying!!! I expect less resistance from the lenders in approving Az short sale deals as there is no incentive for the banks to foreclose on the property and it makes much more sense to approve the short sale.
2. If you own investment property in Arizona then you can now safely short sell your investment and the lenders will not as actively pursue the foreclosure route.
3. Postponements of foreclosures for short sale clients will be easier. Although we can usually postpone foreclosure dates anyways the closer to the date it is the more difficult it can be. Now I wouldn’t be surprised if a few lenders start calling ME asking if they can postpone it so we can get the short sale through instead!
4. Lots and lots of happy people!!! I’ve been fielding calls and emails all day from people who are absolutely ELATED about this news!! Care to share some joy with someone who understands and knows what the heck you’re smiling and carrying on about?? Feel free to give me a call or send me an email – I feel like we’ve won the lottery!!!!!!
Thanks again to everyone for your support and help. I’ve been sending your emails and letters “up the ladder” and I don’t know if it’s one of those letters that worked or not but I’d like to think that all of us had a little hand in helping change Arizona for the better!!
I’ll be posting more updates on our Arizona Short Sale site at http://www.AzHomeHelp.com as well as here on the blog so feel free to keep checking in. I’m sure this isn’t the last we’ve heard from the banking industry and I’ll keep everyone up-to-date on what their plans are as well.
Thanks!
Sean
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18 comments
Thank you for keeping us well informed about this! It is greatly appreciated!
You are welcome!! I’m glad you find this informative…call or email me if you ever have any questions!
Sean,
Thank you for your updates!
we appreciate all that you have done to fight this law. another arizona homeowner says thank you!
Thank you for the great article. This is good news. What is your take on second mortgages and HELOC’s that were not purchase money loans. Do you know if banks are going after people for these types of loans?
Thank you,
Kathy Goldade
Kathy – Thanks, I’m glad you liked the article! Regarding your question, it depends on if they were foreclosures or short sales. I have heard that if the dollar amounts are significant and it was a foreclosure that banks are actively pursuing them. However in a short sale situation this can usually be negotiated. It depends on the banks, the customer, their assets, and the transaction. I know that isn’t a concrete answer but every deal tends to be different.
You mentioned single-family & duplex… would a condominium fall under the same protection?
yes a condominium is considered a single family property.
You mention that lenders cannot pursue deficiency on “Purchase Money” mortgages. In late 2004 we purchased an AZ sfr home as an investment through a 1031 exchange, all cash, to facilitate the exchange time table requirements. After we closed, we pulled out 80% of the equity on a first mortgage fixed rate non-owner refi. Unfotunately, this property is now underwater and we’re considering a short sale. The question is, would the anti-difficiency provison apply to this situations? If not, why not? Thank you.
Hello Sean,
My 1st is owned by National City, plus 2 helocs with National city(2nd position) and chase(3rd position). I’m trying a loan mod on the first, but National City say the investor(s) who own it, are not doing loan mods, and if they were my loan would have to be fully amortirized, and payments more than i’m paying(or cannot afford to pay) now. Question, what will happen to the helocs should i short sale or get foreclosed on ? Of course i could not get National city to listen to a loan remod until i was delinquent, which means now my credit is badly damaged and i cannot qualify for a new loan.
Sean:
I am currently pursuing a short sale on an investment property. Do I need to make sure I get a “non-deficiency clause” included in the short sale deal? I’ve been told that the non-deficiency statute applies specifically to foreclosures, not short sales. What is your take?
Yes, it is usually best to have some sort of clause put in there. You also need to make sure that when you get the approval letter that it states it there as well.
What about those of us who are in VA fixed-rate mortgages? My understanding is that they can still go after us forever to collect on a deficiency judgment, overriding state law.
If they do make a deficiency claim against you in a short sale context, most lenders will take the position that because they are basing that claim on the promissory note you signed, they will have 6 years within which to sue you. If anyone is aware of any different time period, I’d sure like to be made aware of it.
To be clear on my above post, I am obviously referring to a non-owner occupied property such as a rental etc. or a parcel of land or 2nd home that you intended to move into etc upon the sale of your primary home.
So, if I want to let my home go due to owing around 100,000 more than it is now worth, my lender cannot go after me for any money? What about my 26,000 heloc? Thanks.
In most cases the 100k deficiency on the first is safe but the HELOC you may be personally liable for. This is why many people instead go the short sale route so that we can negotiate that HELOC amount down.
Great information! Just wondering if this information is still currently valid for Arizona. We are currently in the process of completing a short sale on an investment property that we own and want to make sure that the lender (Chase) cannot come after us for the deficiency amount, which will be around $58000. The home is less than 2.5 acres, was used a single family home and did have tenants, until last year when we put it up for sale. Do we need to first get an express written waiver of release from the bank regarding the deficiency before we proceed with the short sale? Thanks for your help!
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