Preventing the Loss of Your Home

When a homeowner has defaulted on a mortgage loan, the lender can pursue foreclosure to recover the property. In a non-judicial foreclosure, the lender can simply sell the property when there has been a default. Non-judicial foreclosure requires a power of sale clause in the mortgage agreement. Without a power of sale clause, the lender must seek a judicial foreclosure through the court. A home is one of your most valuable assets and its loss can be devastating. If you are behind on your mortgage payments, contact a Mesa bankruptcy attorney for legal advice.

There are many ways to prevent a foreclosure, including:

  • Loan modification
  • Filing for bankruptcy

Other strategies can also be employed to avoid foreclosure depending on your particular circumstances, such as the cancellation of your mortgage due violations of the Truth in Lending Act, filing a lawsuit against your lender if the company was involved in unethical lending practices, a short sale or a strategic default. A bankruptcy lawyer can explain all of your options in detail, and provide whatever legal help is needed to prevent the loss of your house.

Stopping Foreclosure In Arizona

There are two types of foreclosures in Arizona, the Judicial Foreclosure and the Non-Judicial Foreclosure.

Judicial Foreclosure

The Judicial Foreclosure process in Arizona has devastating effects. It is followed only if the original loan documents do not contain a “power of sale” clause, or if the lender is planning to sue for a deficiency judgment. If this process is used, the lender sues the borrower to obtain a decree of foreclosure and an order of sale. Then the lender begins pursuing for a deficiency judgment.

Non-Judicial Foreclosure

The Non-Judicial Foreclosure process is the most common practice in Arizona . The lender’s trustee first records a notice of sale in the county in which the property is located. The borrower must be served a copy of the notice within five (5) days of it being recorded. The serving may be done by mail or certified mail. A copy of the notice must be posted at the county courthouse at least twenty (20) days before the sale.

Also, the notice must be published in a newspaper for four consecutive weeks. The last publication of the notice of sale cannot be less than ten (10) days before the scheduled sale date.

The trustee conducts the sale and the property is sold to the highest bidder. The purchaser of the property must pay the trustee by 5:00 pm on the next business day following the sale of the property. If the high bidder does not make payment, the sale may be continued or rescheduled for another time or place. However, the trustee may offer the property to the second highest bidder. The deed the highest bidder receives upon payment and completion of the sale is a trustee’s deed. The lender will usually bid the amount that is due for the loan, plus costs that have accrued. This way, if no one else puts a bid on the property, ownership will revert to the original lender.

There are still deficiency judgments associated with Non-Judicial Foreclosures. These are generally exceptions to the rule, but are widely available. It is important that you consult with an experienced attorney to determine whether or not you would be liable for a deficiency judgment under Arizona law.

Deficiency judgments are generally not allowed due to our anti-deficiency statutes in Arizona (A.R.S. 33-727, 33-729, 33-814) if the foreclosed property consisted of 2.5 acres or less, was a single family or two family dwelling, and the mortgages were all purchase money mortgages (meaning that the loans you have on your house are the original loans). Deficiency judgments may be sought on any other types of property and the deficiency suit must be filed by the 90th day after the sale.

The basic rule you must remember is that if you refinanced your house, have taken a second out, taken a line of credit, etc. you may be in danger of a deficiency judgment and should immediately speak with an experienced foreclosure and/or bankruptcy attorney to determine whether or not you will be liable for a deficiency.

The Statutes are below:

33-727. Sale under execution; deficiency; order of liens; writ of possession

A. Except as provided in sections 33-729 and 33-730, if the mortgaged property does not sell for an amount sufficient to satisfy the judgment, an execution may be issued for the balance against the mortgagor where there has been personal service, or the defendant has appeared in the action.

B. If there are other liens on the property sold, or other payments secured by the same mortgage, they shall be paid in their order, and if the money secured by any such lien is not yet due, a rebate of interest, to be ascertained by the court, shall be made by the holder, or his lien on such property will be postponed to those of a junior date, and if there are no other liens the balance shall be paid to the mortgagor. If redemption is not made and the mortgagor or his assigns refuse, after expiration of the time for redemption, to deliver possession of the foreclosed property, the court shall order a writ of possession issued placing the purchaser or his assigns in possession. All executions upon judgments for foreclosure of a mortgage or deed of trust upon real property shall comply with section 12-1566. Any sale of real property to satisfy a judgment under section 33-725 or 33-814 shall be a credit on the judgment in the amount of either the fair market value of the real property or the sale price of the real property at sheriff’s sale, whichever is greater, in accordance with section 12-1566.

33-729. Purchase money mortgage; limitation on liability

A. Except as provided in subsection B, if a mortgage is given to secure the payment of the balance of the purchase price, or to secure a loan to pay all or part of the purchase price, of a parcel of real property of two and one-half acres or less which is limited to and utilized for either a single one-family or single two-family dwelling, the lien of judgment in an action to foreclose such mortgage shall not extend to any other property of the judgment debtor, nor may general execution be issued against the judgment debtor to enforce such judgment, and if the proceeds of the mortgaged real property sold under special execution are insufficient to satisfy the judgment, the judgment may not otherwise be satisfied out of other property of the judgment debtor, notwithstanding any agreement to the contrary.

B. The balance due on a mortgage foreclosure judgment after sale of the mortgaged property shall constitute a lien against other property of the judgment debtor, general execution may be issued thereon, and the judgment may be otherwise satisfied out of other property of the judgment debtor, if the court determines, after sale upon special execution and upon written application and such notice to the judgment debtor as the court may require, that the sale price was less than the amount of the judgment because of diminution in the value of such real property while such property was in the ownership, possession, or control of the judgment debtor because of voluntary waste committed or permitted by the judgment debtor, not to exceed the amount of diminution in value as determined by such court.

33-814. Action to recover balance after sale or foreclosure on property under trust deed

A. Except as provided in subsections F and G of this section, within ninety days after the date of sale of trust property under a trust deed pursuant to section 33-807, an action may be maintained to recover a deficiency judgment against any person directly, indirectly or contingently liable on the contract for which the trust deed was given as security including any guarantor of or surety for the contract and any partner of a trustor or other obligor which is a partnership. In any such action against such a person, the deficiency judgment shall be for an amount equal to the sum of the total amount owed the beneficiary as of the date of the sale, as determined by the court less the fair market value of the trust property on the date of the sale as determined by the court or the sale price at the trustee’s sale, whichever is higher. A written application for determination of the fair market value of the real property may be filed by a judgment debtor with the court in the action for a deficiency judgment or in any other action on the contract which has been maintained. Notice of the filing of an application and the hearing shall be given to all parties to the action. The fair market value shall be determined by the court at a priority hearing upon such evidence as the court may allow. The court shall issue an order crediting the amount due on the judgment with the greater of the sales price or the fair market value of the real property. “Fair market value” shall mean the most probable price, as of the date of the execution sale, in cash, or in terms equivalent to cash, or in other precisely revealed terms, after deduction of prior liens and encumbrances with interest to the date of sale, for which the real property or interest therein would sell after reasonable exposure in the market under conditions requisite to fair sale, with the buyer and seller each acting prudently, knowledgeably and for self-interest, and assuming that neither is under duress. Any deficiency judgment recovered shall include interest on the amount of the deficiency from the date of the sale at the rate provided in the deed of trust or in any of the contracts evidencing the debt, together with any costs and disbursements of the action.

B. If a trustee’s sale is a sale of less than all of the trust property or is a sale pursuant to one of two or more trust deeds securing the same obligation, the ninety day time limitations of subsection A of this section shall begin on either the date of the trustee’s sale of the last of the trust property to be sold or the date of sale under the last trust deed securing the obligation, whichever occurs last.

C. The obligation of a person who is not a trustor to pay, satisfy or purchase all or a part of the balance due on a contract secured by a trust deed may be enforced, if the person has so agreed, in an action regardless of whether a trustee’s sale is held. If, however, a trustee’s sale is held, the liability of a person who is not a trustor for the deficiency is determined pursuant to subsection A of this section and any judgment for the deficiency against the person shall be reduced in accordance with subsection A of this section. If any such action is commenced after a trustee’s sale has been held, it is subject, in addition, to the ninety day time limitations of subsections A and B of this section.

D. If no action is maintained for a deficiency judgment within the time period prescribed in subsections A and B of this section, the proceeds of the sale, regardless of amount, shall be deemed to be in full satisfaction of the obligation and no right to recover a deficiency in any action shall exist.

E. Except as provided in subsection F of this section, the provisions of this chapter do not preclude a beneficiary from foreclosing a deed of trust in the same manner as a real property mortgage. In an action for the foreclosure of a deed of trust as a real property mortgage the provisions of chapter 6, article 2 of this title are applicable.

F. A deed of trust may, by express language, validly prohibit the recovery of any balance due after trust property is sold pursuant to the trustee’s power of sale, or the trust deed is foreclosed in the manner provided by law for the foreclosure of mortgages on real property.

G. If trust property of two and one-half acres or less which is limited to and utilized for either a single one-family or a single two-family dwelling is sold pursuant to the trustee’s power of sale, no action may be maintained to recover any difference between the amount obtained by sale and the amount of the indebtedness and any interest, costs and expenses.

Foreclosure Defense Attorney in Mesa

A foreclosure can have a significant impact on your credit rating and stop you from owning another home for many years. The legal team at Dodge & Vega, PLC will do everything we can to help you avoid a foreclosure. We are highly skilled in foreclosure defense, and will use our extensive legal knowledge when fighting to save your home. Our firm can be counted on for aggressive and determined representation, and will zealously pursue a favorable outcome to your situation. If bankruptcy is the best way to prevent foreclosure, we will help prepare your petition and provide skilled advocacy throughout your bankruptcy case.