| During the economic boom that preceded the recent | | | | case of second mortgage lenders where the money |
| fall, many homeowners throughout the country and in | | | | may not have been used, in whole or in part, to |
| the State of Arizona took out second mortgages on | | | | purchase the home. In these cases the lender may be |
| their homes. As many homeowners now face | | | | entitled to file a separate lawsuit to recover the funds |
| foreclosure, they should ensure they understand the | | | | loaned pursuant to the terms and conditions of the |
| ramifications under Arizona's unique foreclosure laws - | | | | Promissory Note. |
| particularly as applicable to the lender's right to seek a | | | | Another unique situation arises in the case of the |
| deficiency judgment. | | | | borrower who stops paying on the second mortgage |
| In many States, after foreclosing on a home a | | | | but not the first. In today's real estate market, the |
| mortgage lender may file a lawsuit against the | | | | second mortgage lender will often have little incentive |
| borrower to recover the difference between what | | | | to foreclose because there may be no equity in the |
| was owed on the mortgage and the amount received | | | | property - meaning that once the first mortgage is paid |
| by the lender in the foreclosure auction. There are | | | | there won't be anything left for the second mortgage |
| some situations where this is still true in Arizona, but | | | | lender. This effectively makes many second |
| many homeowners are protected by Arizona's unique | | | | mortgages in Arizona unsecured debts, at least for the |
| anti-deficiency laws. These laws apply to preclude | | | | time being. |
| such actions as long as the real estate involved is a | | | | The fortunate news for many homeowners in Arizona |
| single-family home on two-and-one-half acres or less, | | | | is that Arizona's anti-deficiency laws preclude actions |
| and the lender at issue instituted a trustee's sale, and | | | | that might be allowed elsewhere. Moreover, the lack of |
| or if the money loaned was used to purchase the | | | | security in the property and difficulty in collecting |
| property. To ensure whether you might be covered by | | | | judgments that might be pursued, often provide |
| these statutes you should discuss the particular details | | | | incentives for second mortgage lenders to renegotiate |
| of your situation with an experienced Arizona real | | | | the terms of the loans in the borrowers' favor. |
| estate lawyer. | | | | If you have questions about mortgage loans, |
| Because the anti-deficiency statutes apply to block | | | | anti-deficiency laws, or any other related matters, you |
| almost all deficiency actions by first mortgage lenders | | | | should discuss them with an experienced real estate |
| who elect to foreclose, the real doubts arise in the | | | | lawyer sooner rather than later. |