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Foreclosure Laws in Arizona

Maintaining a home is a huge responsibility. It is also an expensive endeavor, one that many in Arizona and around the world are struggling to continue. Homeowners who find themselves behind on their mortgage payments could face foreclosure, so it is wise to know the laws and how they will affect financially challenged homeowners.

Type of Foreclosure in Arizona

In Arizona, lenders have two avenues for foreclosure: judicial and non-judicial. A judicial foreclosure requires a lender go through the court system to get the property back, in a process called lis pendens. The lender sends the borrower a notice to cure default letter, which gives the borrower a set number of days to pay the past due balance and make the mortgage current. If the borrower cannot comply, then the lender can go to court and seek a foreclosure summary. The borrower can choose to answer the petition and have a judge decide the case, or he can let the foreclosure proceed. If it proceeds, the property is sold at auction to the highest bidder.

In a non-judicial foreclosure, court approval is not necessary. This is because when the borrower signed the mortgage papers, referred to in Arizona as the deed of trust or trust deed, there was a clause included called the power of sale. This means that if the borrower defaults on the payments, the lender can repossess the property and sell it at auction. Like the judicial process the non-judicial foreclosure has steps that must be followed, though there are several more steps and the process is more stringent:

  1. A notice of sale must be published in a newspaper located in the county where the property is located.
  2. The notice must be placed on the property 20 days before the sale date and it must be recorded in the recorder's office in the county where the property is located.

Notice of Foreclosure sale must include the following:

  • Date, time and place of sale
  • Street address and legal description of property
  • City tax assessor parcel number
  • Original principal balance
  • Lender's name and the trustee's name and phone number

The sale must take place between 9 a.m. and 5 p.m. on the date listed on the notice, which cannot be a Saturday or a legal holiday. The property is sold to the highest bidder who must make payment at the end of the auction.

Other Things to Note and a Homeowner's Options

Arizona lenders have to right to seek a deficiency judgement, regardless of the foreclosure process used. This court procedure entails the lender seeking the difference between how much was owed on the property and how much the property sold for at auction. If the court finds for the lender, the borrower is made responsible for paying for the difference. This process, along with several other issues such as the 120-day foreclosure process could be the deciding factors for homeowners debating whether to file for bankruptcy protection. A bankruptcy filing creates an automatic stay on any foreclosure proceedings. A homeowner who wants protection from responsibility of a deficiency judgment could file for Chapter 7 bankruptcy protection. For homeowners who want to save their homes, a Chapter 13 filing is an option because it allows for a homeowner to reorganize one's debt. Any homeowner considering either of these routes should consider seeking the advice of a legal professional experienced in foreclosures and bankruptcy so a well-informed decision can be made.

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