Arizona Investors May Soon Be in Hot Water

Arizona investors facing foreclosure may soon be affected by changes in the state's anti-deficiency statutes. On July 10, 2009, Governor Jan Brewer signed into law a significant amendment that decreases the protection for Arizona homeowners who have lost their homes to foreclosure. This new law, due to take effect September 30, 2009, is the first change to the anti-deficiency statutes since 1990.
 
The general purpose of the Arizona anti-deficiency statutes (primarily A.R.S. §33-814(G)) is to protect most homeowners from being sued after foreclosure by their lender for any unpaid remainders of the loan (i.e., deficiencies) if the home was "utilized as a dwelling."  Arizona courts have generously ruled that even investment homes leased out as vacation rentals for only a few weeks of the year were "utilized as dwellings." 
 
According to the new law, a home must be utilized as a dwelling "by the trustor [borrower] under the deed of trust for at least six consecutive months..." Translation: the home must be occupied for at least six consecutive months prior to the foreclosure or the investor may be on the hook for the unpaid balance of  the loan.  
 
This is a huge change that could have significant and far-reaching effects on Arizona homeowners facing foreclosure, particularly investors. For many real estate investors, the anti-deficiency rule that previously prevented a lender from suing a borrower will no longer apply. 

Read the whole bill here - with changes in the text highlighted.

Realizing the gravity of the new changes, the Arizona Association of REALTORS® has approached Brewer's staff regarding the need for an immediate fix for this legislation before it becomes law on September 30 of this year. Their hope is that the Governor will call a special legislative session to address the concerns.

According to Tom Farley, CEO of the Association, "Our goals are to narrow the bill's impact, clarify the statute's intent, and include an emergency clause in the legislation so that the AAR's amendments would take effect and overwrite the amendments that SB 1271 made to the Anti-Deficiency statute before it goes into effect." 

If you have concerns that you may be affected by the changes in the law, please call Anna at 602-595-8900. She'll walk you through it and do her best to get you the answers you seek.

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