questions & answers

Question: My house is in foreclosure, what financial damage will happen to me during and after the foreclosure of my home? Will I be responsible for the difference if the foreclosure is less than the mortgage on the home? Can this foreclosure effect my license as a LCDC counselor granted through the State of Texas?

Answer: Advice as well as information about the laws of other states, such as Texas, is beyond the scope of AZLawHelp. 

Regarding the possibility of a deficiency, that will depend on the size and use of the property, and the character of the loan involved.  Arizona has broad legal protections aimed at preventing borrowers from being legal responsible for any deficiency.  There are two laws that govern the two different types of foreclosure: Judicial foreclosure (A.R.S. 33-729A) and trustee sale (A.R.S. 33-814G).  Both statutes will protect a borrower from owing a deficiency if the property is 2.5 acres or less and utilized as a single or two family dwelling.  In a judicial foreclosure, there is an added requirement that the loan be "purchase money", that is that the loan was obtained to pay part or all of the purchase price of the home.   Most lenders, if there is a deed of trust, prefer the trustee sale option to foreclose as it is a much faster process for repossessing the property. 

While a borrower who meets these requirements will generally be protected, it may be prudent to consult an attorney as there are circumstances, some common, where a borrower may have a deficiency, even in a situation where a trustee sale is the foreclosure process used.  Where there are common problems, is when there are multiple home loans, or a line of credit such as a HELOC (Home Equity Line of Credit).  Even though the anti-deficiency statute for trustee sales do have a purchase money requirement, it is best to read it as if it does where mulitple loans are involved, this is a better indicator of a deficiency. 

For more specific information or legal advice, contact an attorney.  A homeowner facing foreclosure may also utilize the Access to Justice Online Intake System to apply for free and reduced fee legal services in Arizona, the link is on the top right of AZLawHelp.org under the LegalLEARN box.