Arizona is infamous for having the anti deficiency law that made it really easy for homeowners to walk away from their homes with virtually no recourse in the future. Now, it looks like Arizona residents that live in their primary homes for 6 continuous months prior to their home being foreclosed will still be protected, but investors, second homeowners etc will not be able to walk away so easily starting September 30, 2009.
The new law states that any homeowner that doesn’t live in a property for a continuous six month period prior to foreclosure will not be eligible for protection under the state’s anti-deficiency statute. The lender will now have the right to pursue these homeowners under the new law for any shortfall between what they sale the home for and what is owed on the mortgage.
At issue are changes to a state law that now generally does not allow a lender that forecloses on an home mortgage to recover the balance of what is owed the lender if the foreclosure sale doesn’t produce the full amount.
While some states have laws against so-called ”deficiency judgments” dating back to the Great Depression, Arizona’s law was enacted in 1971. It is intended to protect consumers from financial ruin.
”Times are hard enough as is. It may help your friendly banker but it’s not in the interest of your state’s economy … to go ahead,” said Charles Delbaum, a lawyer for National Consumer Law Center in Boston
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California has had a similar law for years. What I think would be even better would be a way for people not to walk away from their homes… and the BK laws are addressing that… there’s a buzz on Capital Hill that BK judges might be allowed power over first mortgage debts. Attempts to pass similar laws recently have not been successful, but each day the situation for homeowners grows more dismal… and maybe now’s the time.
- Paul