questions & answers

Question: My home was forclosed on 2yrs ago after my real estate agent tried for 2 long years to short sale it.  Mortgager #1 denied all offers for the first 1.5yrs, while 2nd mortgager was agreeable.  Final offer was finally accepted by Mortgager #1 but 2nd mortgager completely blocked the sale by rejecting offer.  Now 2nd mortgager still sends me mortgage bills and calls me daily to try to collect this debt!  They also report my payment as LATE EVERY MONTH! Is there any way to get them to leave me be?  Do they have the legal right to harass me even though they are the reason I went through this foreclosure?

Answer:

Whether a lender may pursue a borrower for a deficiency on a mortgage will depend on the foreclosure process used, and then potentially on the purpose or use of the mortgage.  In Arizona a property may be foreclosed on (basically a repossession) by a trustee sale or a judicial foreclosure (foreclosure using the court process).  Once a borrower understands the process used she or he may then determine if an anti-deficiency statute applies.

In the state of Arizona, there are two anti-deficiency statutes which may prevent a lender from pursuing a borrower for the remaining debt of a mortgage.  First, lenders may not collect on a deficiency balance following a trustee sale if the property was two and a half acres or smaller and primarily used as a one or two family dwelling. A.R.S. 33-814.  Second, lenders may not collect on a deficiency if the property was subjected to a judicial foreclosure, was two and a half acres or smaller, was utilized primarily as a one or two family dwelling, and the mortgage was given for and used as the purchase money for the property, either in whole or in part.  A.R.S. 33-729.  In a judicial foreclosure, the mortgage must be used to purchase the property or construct the home at the time of purchase.  If neither of these statutes apply, then a lender has the right to pursue the borrower to recover the remaining debt.

In the case of a trustee sale, the lender will have ninety days after the date of the trustee sale to sue the borrower for the debt. A.R.S. 33-814.  In the case of a judicial foreclosure, “if the mortgaged property does not sell for an amount sufficient to satisfy the judgment, an execution may be issued for the balance against the mortgagor where there has been personal service, or the defendant has appeared in the action.” A.R.S. 33-727.  A deficiency judgment in a judicial foreclosure is not subject to the same ninety day statute of limitations as a trustee sale; the lender may enforce the judgment up to several years after obtaining it.

When dealing with foreclosure matters, it is very important to consutl with a licensed attorney who can determine and advise you as to what liability you may or may not still have to the lender.  To locate legal assistance or resources, consult AZLawHelp's Legal Aid Listing. A borrower may also determine qualification for free or reduced fee legal assistance through the Arizona Online Intake System if he or she is residing in Arizona.