The Arizona Court of Appeals has decided several recent cases interpeting and applying Arizona’s anti-deficiency statutes. Watch this short video power point presentation to learn about Arizona’s Anti-Deficiency Statutes:
What constitutes qualifying property?
The two different types of foreclosures in Arizona.
The type of loan that qualifies for protection in judicial foreclosure.
How Arizona’s anti-deficiency statutes apply and protect certain property and certain loans.
Lenders and homeowner borrowers have been waiting for clarification of various questions arising under Arizona’s anti-deficiency laws. Today, the Arizona Court of Appeals resolved three of the key issues involving Arizona’s anti-deficiency law applicable to judicial foreclosure actions, ARS § 33-729: (1) whether the refinancing of a purchase money loan destroys the purchase money character of the loan and the borrower loses deficiency protection; (2) whether disbursements from a construction loan to construct a residence that otherwise qualifies for protection are considered purchase money; and (3) the treatment of a construction loan when part of the loan proceeds were disbursed for purposes other than the acquisition of the property or construction of a qualifying dwelling. Helvetica Servicing, Inc. v. Pasquan (Ariz. Ct. App. 3/20/12).
Under Section 33-729, “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 lender is limited to satisfying the amount owed by foreclosing on the property; the lender may not collect any deficiency (the difference between the debt and the value of the property upon foreclosure) from the borrower’s other assets. In addressing the three issues presented in the case, the Court relied heavily on the public policies underlying the Arizona anti-deficiency laws – to protect certain borrowers and discourage the overvaluation of property in the lending process.
In the Pasquan case resolved by the Court of Appeals, the borrower purchased an existing residence in Paradise Valley for $935,000. They paid $335,000 “down” and financed the rest, $600,000, with a loan from Hamilton Mortgage Company, secured by a deed of trust against the property. Later, they obtained a new loan from Desert Hills Bank for $1.6 million, which was secured by a new first deed of trust against the property. The Desert Hills loan was used to pay off the balance owed on the Hamilton loan and expenses to demolish the existing home and construct a new home in its place. The borrowers then borrowed another $100,000 from Desert Hills, secured by the existing first deed of trust. They later borrowed an additional $400,000 from Desert Hills, secured by a second deed of trust recorded against the property. According to statement submitted by the borrower, “all of the Desert Hills loan proceeds were used for construction expenses.” Read more…
Various sources have reported that JP Morgan Chase has temporarily halted foreclosures because of potentially flawed paperwork. One issue that has arisen is reports that the people responsible for reviewing the loan documents failed to do so, such that they were actually unable to truthfully verify that the loans were in default and the amount of the default. Chase’s stay on foreclosures follows GMAC’s halting of certain foreclosures and evictions in 23 states last week based on procedural problems in its paperwork.
According to reports, the stoppages are just temporary and will not significantly affect the overall number of foreclosures.
The Federal government has two programs to help the unemployed avoid foreclosure.
Through the Housing Finance Agency (HFA) Innovation Fund for the Hardest Hit Housing Markets (the Hardest Hit Fund), there $2 billion of assistance that will be made available to those having difficulty making their loan payments due to unemployment. This fund will be distributed to states that have been hardest hit by the downturn in the economy. Alabama will receive over $60 million. Arizona is not on the list published by the government.
The U.S. Department of Housing and Urban Development (HUD) is in the process of launching another program whereby $1 billion in assistance will be provided through the Emergency Homeowners Loan Program. That loan program will provide interim assistance for not more than 24 months to people who are or may face foreclosure due to unemployment, underemployment or medical problems.
Despite a broad arbitration provision in the Declaration of Covenants, Conditions and Restrictions (CC&R’s), a homeowners association’s claim for an injunction was not subject to arbitration and the association was entitled to file a lawsuit in Superior Court to obtain an injunction.
In the case of Saguaro Highlands Community Association v. Jack C. Biltis and Leigh Biltis, a dispute arose as to whether the home owner’s swing set violated the CC&R’s. The association filed a lawsuit to obtain an injunction to have the owners remove the swing set. The owners sought to dismiss the action and force the association to arbitrate the dispute. The Superior Court disagreed and the Court of Appeals affirmed. Both held that the association retained the right to pursue an injunction in Court based on the wording of the CC&R’s for that community, although the Courts noted the strong public policy favoring arbitration and based on which arbitration clauses are broadly construed.
The Arizona Court of Appeals recently decided a case where a deed of trust was mistakenly initially recorded without a legal description. In 3502 Lending, LLC v. CTC Real Estate Service, the borrower executed a deed of trust with the legal description attached as an exhibit, but the deed of trust was initially recorded without the exhibit. As between the parties to the deed of trust, the Court held that the deed was valid since it included the legal description when it was signed.
The Court next considered whether the deed of trust was superior to a later recorded deed of trust, even though the first deed of trust was recorded without the legal description. The Court held that it was, notwithstanding the initial defect in the first deed of trust, since the party holding the second deed of trust had received actual notice that there was a prior/superior deed of trust against the property.
This case reinforces the law that the recording system is for the benefit and protection of non-parties to the transaction and parties who do not have actual notice of a prior recording.
The State of Arizona has filed a lawsuit against a company accused of a foreclosure help scam. According to the allegations in the civil lawsuit, the Guardian Group charged borrowers up front fees in order to modify their loans, but rarely provided the service. The Arizona Attorney general has claimed that the company misrepresented, among other things, the amount of principal reduction to be expected, that it had investors ready to purchase their loans and the amount of refunds.
November 1, 2008 –
Thank you for your diligent effort representing us in this awful lawsuit over the last four years. Although, in the term of this case, I wasn’t awarded all that I believe we deserved, I feel I was served by one of the finest law firms in Arizona. The high level of integrity, focus and interest in the handling of my matter, never waned in the four plus years this case spanned.
Staff attorneys George Smith and Daphne Reaume, along with your support staff…http://Actual Client - JS
