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The Arizona Anti-Deficiency Statute: Can a Home loan Lender Sue You Immediately after a Foreclosure Has Occurred?

August 28, 2012

Mortgage Lenders

The Arizona Anti-Deficiency Statute: Can a Mortgage loan Financial institution Sue You Right after a Foreclosure Has Occurred?

Post by Scott Hyder

A prevalent query from prospective customers is whether a home loan financial institution can sue for any deficiency sum owing after a foreclosure. It is essential for a man or woman facing any foreclosure to seek advice from with a qualified Arizona real estate lawyer, Arizona foreclosure lawyer or Arizona bankruptcy attorney to figure out the proper analysis to this situation.

Arizona Anti-Deficiency Statute

Below Arizona law, if you took out a mortgage utilised to buy a residence on two 1/2 acres or significantly less that has been lived in (either by oneself or an additional particular person, such as a renter) and a foreclosure happens, the lender generally are unable to sue youfor any deficiency amount. For example, if you took out a $ 100,000 mortgage loan used to obtain your property and the property is only well worth $ 70,000 at the time of foreclosure, the loan company is prohibited below Arizona law to sue you for the $ 30,000 variation.

This is not necessarily the case for other types of mortgages, this kind of as property equity lines of credit score (HELOCs). If you tapped into your home’s equity a few years back (do you remember the days when our homes really had equity?) and used the income to pay out off debt or remodel your house, that loan company can sue you for the variation immediately after the foreclosure occurs. For instance, if you have a initial mortgage loan for $ 100,000 employed to buy the house, a 2nd HELOC home loan for $ 50,000, and the home is worth $ 70,000 when the foreclosure took location, the first loan provider acquired the total $ 70,000 simply because it was in 1st place. That first loan provider cannot sue you for the $ 30,000 deficiency you owe due to the fact the $ 100,000 loan was used to acquire the house and the Arizona anti-deficiency applies. Nevertheless, the 2nd loan provider, which obtained none of the $ 70,000 simply because it was in second place, can sue you for the total $ 50,000 due to the fact that funds was not employed to obtain the home.

Remember that the anti-deficiency statute only applies with residential mortgages. If you took out a loan for $ 500,000 to obtain industrial house or vacant land and your residence was well worth $ 400,000 when the foreclosure occurred, the lender can sue you for the $ 100,000 deficiency since the anti-deficiency statute does not implement to non-residential loans.

Refinanced Loans

What if you took out a mortgage loan for $ a hundred,000 at 10% to acquire your house but later refinanced it with a distinct loan provider for the exact same amount at 5% interest? Do you still have safety under the anti-deficiency statute? Yes. What if you took out a $ a hundred,000 loan, but later refinanced it for $ 150,000, tapping into some of your home’s equity? Does the anti-deficiency statute use? Maybe. Some older instances have held that the anti-deficiency statute could implement underneath these conditions, but such instances were extremely particular to the set of information posed to the court. The Arizona Court of Appeals is presently hunting at such concerns.

Defenses

If you speak to a capable Arizona bankruptcy attorney, the number a single defense against any lawsuit exactly where the anti-deficiency statute does not use is to file a bankruptcy. That will alleviate you from liability. However, you could be in a position to assert a “statute of limitations” defense in lieu of filing bankruptcy. Normally speaking, a mortgage loan provider that forecloses on your home has 90 days after the foreclosure to sue you for any deficiency amount (assuming the anti-deficiency statute does not use). A financial institution in second place (i.e., a HELOC financial institution) does not have to comply with such 90 day period if that loan provider was not the loan provider that initiated the foreclosure. That financial institution can sue you, normally inside of 6 many years immediately after you defaulted on that loan.

For more info, please go to http://scotthyderlaw.com/

About the Writer

Scott Hyder is a licensed Arizona lawyer training in the locations of bankruptcy, true estate, estate organizing and enterprise transactions. Please go to http://scotthyderlaw.com/ for a lot more information.

Use and distribution of this article is subject to our Publisher Tips
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Scott Hyder is a licensed Arizona attorney practicing in the regions of bankruptcy, actual estate, estate arranging and business transactions. Please go to http://scotthyderlaw.com/ for much more data.

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Use and distribution of this write-up is topic to our Publisher Tips&#13
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