House of Representatives Pass Anti-Deficiency Fix – SB1004

I just received word that the House of Representatives unanimously passed SB 1004 .  With this fix, Arizona will continue to operate as a deed of trust state with the protections that have been in place since 1971.  SB 1004 repeals and replaces ARS §33-814 which essential returns the statute to its original status prior to the passage of SB 1271.  This bill passed as an emergency pass which means it will go into effect as soon as signed by Governor Brewer.

A brief overview of the changes in the anti-deficiency statue and its ramifications:

Prior to Sept 30, 2009 – Arizona Revised Statutes ARS §33-814 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.

After Sept 30, 2009 – SB 1271 amended ARS §33-814 to require that the borrower (trustor) must have “utilized” the property for six consecutive months and a certificate of occupancy must have been issued. The unclear language was subject to interpretation of which the most common was that after September 30, 2009, properties selling at trustee’s sale likely would most likely 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.

When SB 1004 goes into effect – Anti-deficiency protections for Arizona homeowners are reinstated as SB 1271 is repealed.

Any Arizona homeowner should consult legal counsel regarding the application of the anti-deficiency statute.