08-22-2009, 10:02 PM
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#4 (permalink)
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| Homeowner & Forum Guide
Join Date: Feb 2008 Location: San Diego
Posts: 879
Nominated 0 Times in 0 Posts TOTW/F/M Award(s): 0 | Re: Short Sale AZ
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Originally Posted by jaskoo  tihanks, Faith. I will fight. Is it posible for first to sue for defic. | Hello again, In Arizona, there are two types of “notes” given for real property: a “Deed of Trust” or a “Mortgage”. Despite the common parlance of the term “mortgage,” most people in most states do not actually have Mortgages. They have Deeds of Trust. A Deed of Trust has three parties to the agreement, and an actual Mortgage has only two. Actual mortgages are very uncommon in most states. Now, the remedy of a lender for a home in default depends on what type of note was used to secure the property. If there is a true mortgage in place, the lender must sue in civil court in a process known as “judicial foreclosure.” Important points. 1.) The legal fees associated with a judicial foreclosure action are substantial. 2.) A judicial foreclosure takes more time than “the other method” . 3.) A lender may sue for a deficiency judgment with a judicial foreclosure, but only in the case of non-purchase money loans. (A “purchase money loan” is one that is applied to the purchase of real property. A “non-purchase money” loan is money you pulled out of your home to buy “stuff”. If you got a line of credit, and spent all the money on a new boat, fancy clothes, and a new haircut, the lender can indeed sue you for that money. HOWEVER, they will have to use the process of judicial foreclosure to do it, which is a lengthy and costly process. It’s too expensive for the lender, with very little likelihood of getting money back from someone who is “insolvent” to begin with. If the note used to secure the property is the much more common Deed of Trust, the property will most likely be subject to a “Trustees Sale,” in which a notice is posted that the property will be sold to the highest bidder on the courthouse steps. If this happens, there is no recourse for a lender to “come after” the homeowner for money. Now, a lender, who is party to a Deed of Trust, may also use the process of judicial foreclosure to take your house away. Any yes, this does give them the right to attempt to get a deficiency judgment against the borrower. Does this happen often? No. Why? For the reasons mentioned above: it’s expensive, and time consuming. Another option for a lender is to “forego” their interest in the home, and sue the borrower directly for the money owed to them. All of it. Lenders very rarely do this however, for the reasons stated above: it is expensive and time consuming; more importantly, if a borrower is going into foreclosure, there is a pretty good likelihood that the borrower has no money to “go after.” Also, in the landmark case of Baker v Gardner heard before the Arizona Supreme Court in 1988, the justices hold forth in the Holding & Conclusion that “. . .the legislature’s objective in enacting [its anti-deficiency statutes] was to abolish the personal liability of those who give trust deeds encumbering properties of two and one-half acres or less and used for single-family or two-family dwellings. . . The holder of the note and security device may not, by waiving the security and bringing an action on the note, hold the maker liable for the entire unpaid balance.” So, can you be sued for a deficiency on your mortgage? If it's a purchase money mortgage never refinanced it's covered under anti deficiency judgment law. Maybe a good, honest, reliable and truthful Real Estate Lawyer can answer this question. The links below may be able to answer your questions. This is not a legal advice but for your information only. http://www.dianedrain.com/RealProperty/GeneralRealProperty/REALESTATEArticlesLinks/SueOrForeclose/SueorForeclose.htm http://www.deconcinimcdonald.com/August2007.html Source: A. Butler, Ask the Broker, Real Estate Thanks and God bless.
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Faith
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