If you’re behind in your mortgage payments and you live in Arizona, it’s a good idea to familiarize yourself with the basics of how the foreclosure process works so you aren’t taken by surprise. For instance, you should know that most homeowners receive only one official notice that the foreclosure is taking place—a notice of sale.
In this article, you’ll learn about the most common type of foreclosure procedure used in Arizona, get information about homeowner rights during the process, and find out whether you might have to pay a deficiency judgment after the foreclosure sale.
Under federal law, in most cases, the loan servicer (the company that handles your mortgage account on behalf of the loan owner) can’t start a foreclosure until you're more than 120 days delinquent on the loan. (To learn more about the federal law that delays the start of foreclosure for 120 days, see How Soon Can Foreclosure Begin?)
Most foreclosures in Arizona are nonjudicial, which means a court is not involved in the process. Instead, a third party called a "foreclosure trustee" handles the procedures.
An Arizona foreclosure could be judicial, though, which means it goes through the courts. Most of the time, however, the foreclosing party will choose to use the cheaper, faster nonjudicial option. So, the nonjudicial process is described below. (To learn more about judicial and nonjudicial foreclosures, see Will Your Foreclosure Take Place In or Out of Court?)
To officially start a nonjudicial foreclosure in Arizona, the trustee records a notice of sale in the land records. The sale date can’t be any sooner than 91 days after the date the trustee records the notice. (Ariz. Rev. Stat. § 33-808(C)(1)).
Notice to the borrower. The trustee mails the notice of sale to the borrower by certified mail within five business days after recording it. (Ariz. Rev. Stat. § 33-809(C)).
Notice to the public. The trustee also publishes the notice of sale in a newspaper for four consecutive weeks, posts it on the property at least 20 days before sale, and posts the notice in the court building. (Ariz. Rev. Stat. § 33-808).
Catching up on the missed payments, plus fees and costs, to stop a foreclosure is called “reinstating” the loan.
Arizona law permits a borrower to reinstate a defaulted loan up to 5:00 p.m. on the last day, other than a Saturday or legal holiday, before the sale date. (Ariz. Rev. Stat. § 33-813).
Some states have a law that allows a foreclosed homeowner to repurchase the home after the foreclosure sale—called "redeeming" the property—by:
Arizona, however, does not have a law permitting the former owner to redeem the home after a nonjudicial foreclosure. (Ariz. Rev. Stat. Ann. § 33-811(E)).
In a foreclosure, the total debt the borrower owes often exceeds the foreclosure sale price. The difference between the debt and the sale price is called a “deficiency.” For instance, say you owe $400,000 to the loan owner (the "bank"), but the foreclosure sale brings in just $375,000. The deficiency in this example is $25,000.
What's a deficiency judgment? Some states allow the bank to seek a personal judgment, called a “deficiency judgment,” against the borrower when the sale doesn’t fully repay the mortgage debt. After the bank gets a deficiency judgment, it may collect this amount from the borrower through regular collection methods, like garnishing the borrower's wages or levying the borrower's bank account.
Deficiency judgments in Arizona. Under Arizona law, the bank can't get a deficiency judgment after a nonjudicial foreclosure if the property is:
Otherwise, the bank may generally obtain a deficiency judgment by filing a separate lawsuit within 90 days after the nonjudicial foreclosure sale.
To read Arizona’s nonjudicial foreclosure laws for yourself, go to the Arizona Revised Statutes and look in Sections 33-801 to 33-821.
If you want additional information about the Arizona foreclosure process, want to find out if you have any defenses to the foreclosure, or think the foreclosing party hasn’t followed all of Arizona’s foreclosure laws, consider talking to a foreclosure lawyer.
To get information about different ways to avoid a foreclosure, like loan modifications, short sales, and deeds in lieu of foreclosure, talk to a HUD-approved housing counselor.