Hi friends!
Below is some background information on the legislation that has the lending and real estate industries a buzz with its intended and unintended consequences.
SB 1271 – Serious Changes to Arizona’s Anti-Deficiency Statute
SB 1271 was sponsored by Senator Sylvia Allen, a REALTOR® from the White Mountains area of our state. The legislation started out in January as a bill dealing with jail districts and property tax limits. In June a strike-everything amendment gutted the original bill and changed its direction entirely. The Arizona Bankers Association argued successfully that the changes provided in the legislation were necessary because abuses in the current law were costing Arizona-based banks millions in losses. There was significant sympathy for the Arizona community banks in making the changes provided by this legislation. In other words, the legislators found it very easy to hold property investors liable for their debts while arguing that homeowners would still retain their deficiency protection if they lived in the home for six consecutive months. The legislation sailed out of the Senate by a unanimous vote but just barely received enough votes to pass the Arizona House of Representatives. The Governor signed the bill on the last day to sign or veto the legislation.
The current law: Arizona Revised Statutes (A.R.S.) § 33-814 currently states that within 90 days after the date of sale of a trust property under a trust deed, a legal action may be brought to recover a deficiency judgment against the borrower (trustor) who has now had their property foreclosed. The deficiency judgment must be for an amount equal to the sum of the total amount owed as of the date of the sale either by the fair market value of the trust property as determined by the court or the sale price at the trustee’s sale, whichever is higher. The current law prohibits a lender from seeking a deficiency judgment against the trustor (foreclosed property owner) if the trust property is 2.5 acres or less and is used as a single one-family or single two-family dwelling.
The law effective September 30, 2009: SB 1271 amended A.R.S. § 33-814 (G) to require that the trustor must have “utilized” the property for six consecutive months and a certificate of occupancy must have been issued. What does this likely mean? Various attorneys are opining different theories. AAR General Counsel Michelle Lind's interpretation of the statute is that after September 30, 2009, properties sold at trustee’s sale likely will not qualify for the anti-deficiency exemption unless the trustor lived in the single one-family or single two-family dwelling for at least six consecutive months. The legislative Fact Sheet, as transmitted to the Governor, states that SB 1271:
Prohibits a deficiency judgment against a trustor pursuant to a trustee’s sale of a trust property that is 2.5 acres or less and is used as a single one-family or single two-family dwelling if both of the following apply:
o The trustor has lived in the trust property for at least six consecutive months.
o A certificate of occupancy has been issued for the property.
Places the burden of proof on the trustor to demonstrate that the statutory requirements to prohibit a deficiency judgment are met.
What does this mean to you????
EFFECTIVE SEPTEMBER 30TH, 2009!!!!!!!!!!!
These are huge changes that are coming! Some owners and investors need to be prepared for the consequences of this new law and understand the long-term financial consequences of a deficiency judgment! The current law had protections for investors, the new law will take all of those away. Even consider the owner that rented out their property instead of just letting the property go back to the bank when values dropped. Well, by them doing that, they now have unintended consequences due to this new law. One of the only ways for that owner to avoid foreclosure and a deficiency judgment is to short sale the home. The new law will keep everyone in our industry buzzing, but please spread the word about this new bill if you know anyone facing foreclosure!
www.ShortSaleTwins.com
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