Paul Clark
In this Blog we open the conversation with
economic loss caused by the current mortgage
crisis.
Arizona Foreclosure Law Summary
Quick Facts
- Judicial Foreclosure Available: Yes
- Non-Judicial Foreclosure Available: Yes
- Primary Security Instruments: Deed of
Trust, Mortgage
- Timeline: Typically 90 days
- Right of Redemption: None
- Deficiency Judgments Allowed: Varies
In Arizona, lenders
may foreclose on deeds of trusts or mortgages in
default using either a judicial or non-judicial
foreclosure process.
Judicial Foreclosure
The judicial process of foreclosure, which involves
filing a lawsuit to obtain a court order to
foreclose, is used when no power of sale is present
in the mortgage or deed of trust. Generally, after
the court declares a foreclosure, your home will be
auctioned off to the highest bidder.
Non-Judicial Foreclosure
The non-judicial process of foreclosure is used when
a power of sale clause exists in a mortgage or deed
of trust. A "power of sale" clause is the clause in
a deed of trust or mortgage, in which the borrower
pre-authorizes the sale of property to pay off the
balance on a loan in the event of the their default.
In deeds of trust or mortgages where a power of sale
exists, the power given to the lender to sell the
property may be executed by the lender or their
representative, typically referred to as the
trustee. Regulations for this type of foreclosure
process are outlined below in the "Power of Sale
Foreclosure Guidelines".
Power of Sale Foreclosure Guidelines
If the deed of trust or mortgage contains a
power of sale clause and specifies the time,
place and terms of sale, then the specified
procedure must be followed. Otherwise, the
non-judicial power of sale foreclosure is
carried out as follows:
The trustee must record a notice of sale
in the office of the recorder of the county
where the property is located. Within five
(5) days after the notice is recorded, the
trustee must mail, by certified mail, a copy
of the notice of sale to each of the people
who are parties to the trust deed, except
for himself. Additionally, the notice must
appear in a newspaper in the county where
the property is located once a week for four
(4) consecutive weeks, with the last notice
being published not less than ten (10) days
prior to the date of the sale.
Optionally, if it can be done without a
breach of the peace, the trustee can post
the notice at least twenty (20) days prior
to the date of the sale, in some conspicuous
place on the property to be sold and/or he
or she can post the notice at the courthouse
or at a specified place at the place of
business of the trustee in the county in
which the property is located.
The trustee or the trustee’s agent must
conduct the sale. The sale is for cash to
the highest bidder, except that the lender
can make a "credit bid," which means to
cancel out some part (or all) of the money
the borrower owed the lender on the lean,
instead of paying cash. A successful high
bidder must pay the bid price by 5 pm of the
day after the bid, other than a Saturday or
legal holiday. Every bid is an irrevocable
offer until the sale is completed, which
happens when the bidder pays the bid price
to the trustee’s satisfaction. If the high
bidder fails to make the payment by 5:00 pm,
the day after being notified of the option
to buy, then the trustee may postpone the
sale.
The trustee may postpone the sale to another
time, or another place, by giving notice of
the new date, time and place by public
declaration at the last place and time the
property was offered for sale. No other
notice is required. A trustee may also, by
written agreement, extend the time for a
buyer to come up with the payment.
Once the sale is complete, the proceeds
will go to the payment of the obligations
secured by the deed of trust that was
foreclosed, then to junior lien holders in
order of their priority. The successful
bidder gets a trustee’s deed, which provides
conclusive evidence that the trustee
conducted the foreclosure sale property.
A note regarding Deficiency Suits:
A lender may not bring a deficiency suit against a
person who lost a property that is 2.5 acres or less
at a foreclosure, provided the property was a single
one-family or a single two-family dwelling. This is
so even if the high bid at foreclosure was less that
the balance due on the loan. However, in
foreclosures against other types of property, a
deficiency suit is allowed, but is limited to the
difference between the balance owed and the fair
market value of the property, and then only if the
suit is brought within ninety (90) days of the power
of sale foreclosure.
