Background: SB 1271 started out as a jail district and property tax limits bill. But in a strike everything amendment to the bill it turned into an anti-deficiency bill that would benefit the banks. Based on the testimony given at the hearing on June 10th the changes to A.R.S. §33-814(G) seemed reasonable and it passed. But after further research this change will have far reaching legal and practical impacts.
Cause: One of the problems Arizonans facing foreclosure have is the very short timeline involved. We have one of the shortest in the nation – only 90 days from default. And now we are going to let banks chase defaulting borrowers for recovery above and beyond that which is recouped when the bank sells off the foreclosed house.
Effect: So suddenly the banks no longer have any incentive whatsoever to work with a borrower to resolve delinquencies. Now the bank can quickly foreclose, sell the house below market value and then go after the defaulting owner for the difference! This will in turn drive down Arizona real estate prices even further. Perpetuating falling real estate prices will only worsen our struggling economy. Furthermore, the relationship between the lender’s rights and the borrower’s rights will be seriously imbalanced by this change to the current law. The only winners here will be the banks who got us into this financial mess in the first place.
Mike Hubbard said
Just another example of the banks trying to screw us!!
Amy said
Hi have a question on a possible scenario as it relates to changes to SB1271.
I am looking into buying a new primary residence and using my existing residence as a rental. I have outgrown my home that i have lived in for 6 years, original owner, and in the given market cannot sell it to even break even as it is appriasing for far less than it cost new (surprise, az). However while I HAVE NO INTENTION, of losing my exisitng home to forclosure, if I cannot sustain the rental and my new home, am I liable under the new changes to owe the lender for the loss on the sale at a short-sale or forclosure?
Jeff Hunt said
That’s a great question! The law does not go into effect until September. And then we’ll have to wait for actual examples to get tested in the courts before we really know how the law will be interpreted for sure.
There is a Frequently Asked Questions (FAQ) doc in the works. I’ll post links to it when it is published.
Craig Smith said
Hello, Does the six month requirement mean any six month period or do you have to have been living in the home for six months when it goes into foreclosure? Also, I have done some research on this bill and another requirement to be exempt is that a certificate of occupancy must have been filed. Can you explain this? Thank you for your time.
Craig
Jeff Hunt said
A Certificate of Occupancy is a document that is issued by a city or town’s planning and zoning department when a building has been completed and then approved by a building inspector. So it is probably reasonably safe to assume your home has one! A copy can be obtained from your local zoning department.
As for the 90 day thing, even the attorneys are having troubles interpreting this. There is a Frequently Asked Questions (FAQ) doc in the works which I’ll post links to once it is finished.
Jeff Hunt said
Breaking news: HB 2008 which contains a repeal of SB 1271, the anti-deficiency legislation just passed House Appropriations. More updates to follow.
How Many Times do We Need to Kill AZ SB 1271? « Arizona Real Estate General Info said
[...] owed on their property and what the bank ended up selling it for. But common sense prevailed and SB 1271 was nullified by HB 2008 which passed several months [...]