Alarms About The Effects Of New Arizona Foreclosure Laws

The trend today for many is to opt for Arizona foreclosure properties before looking at anything else, but new laws are resulting in thousands of litigation’s that are leaving many destitute and without a clear deed to the property they thought they were buying. With passage of Senate Bill 1721 in July 2009 and a revision enacted in September, many are finding themselves facing years of lawsuits and appeals in the hopes of straightening out the whole mess.

This section of the law was meant to correct problems in Senate Bill 1721, but decisions were made based on erroneous information and it resulted in much confusion which is now hitting the courtroom in need of clarification. The purchase of foreclosed property is especially difficult under this new law as the lender can place a lien on the property until the original mortgage is fully paid.

The law was designed with a good purpose in mind, to protect lenders from ending up on the losing end of foreclosures and in financial straits. Unfortunately, the result has been disastrous for all concerned. Under the new law when a house is foreclosed on lenders have the right to file a deficiency judgment with the courts against the former owners. The judgment is for the difference between the resale price of the home and the original loan. When they can’t collect, they can place a lien against the property and hold it until the old debt is paid. But what’s this do to new buyers? It leaves them caught in the middle.

Those who buy in this area to become snowbirds may find they have bitten off more than they can chew as there is also a residency clause included. What it states is that anyone absent from their property for 30 days or more, who have missed even one payment, can return home to find their possessions and property sold in order to repay the mortgage. And, if sufficient funds are not collected, the former homeowners are held responsible for the difference. This also includes cases of extended hospitalization. We can all agree that lenders have been coming out on the short-end of the stick in the foreclosure market, but one must ask, is the law fair? Only the courts can decide.

Laws are written by the legislature, voted on by the people, and then enacted. However, it is through the court system that they are interpreted and it this interpretation that clarifies murky issues. Until questionable components associated with this law are clearer, however, everyone is taking precautions including lenders who are becoming more reluctant to write loans for those wishing to buy these low-cost homes.

Many fear the results of a repeal of the law, if it is deemed unconstitutional, since it may leave them in a far worse situation than they are currently in. New buyers may find they are in the worse position of all having bought a home that includes a lien for more than the value of the property and finding they may have to return it to the former owners in the end anyway without compensation. One example of how complex this can be is that it is unclear whether the lien placed on the property is indefinite or how it might affect a resale.

At the present time thousands of lawsuits are being filed by lenders hoping to eventually collect the full value of the debt. For those who didn’t have the money to pay the mortgage in the first place, this is even more problematic as they rarely have money to ensure the strong defense required to fight this action.

Many questions arise when one is dealing with an issue beyond their expertise. The legal system, real estate agents, lenders, and especially those with property or thinking about buying property are all confused as to how new legislation will impact the Arizona foreclosure market. Therefore, one should consult with experts in the field, especially with those with an understanding of the legal implications, before considering a property of this type.

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