Anti-Deficiency, Your Client and RAPAC

If you have been in the real estate business during any of the downturns over the past 45 years, you are familiar with mortgage deficiency and how it affects homeowners.

A mortgage deficiency is created when the lender forecloses and the total debt owed by the distressed homeowner/borrower is more than the proceeds from the foreclosure sale. Example: borrower owes $100,000, house sells at the foreclosure sale for $80,000. Distressed borrower owes lender $20,000 plus interest and fees. The total amount owed can increase over time as the fees and interest accumulate.

The lender will file a Deficiency Judgement which allows the lender to use various tools to collect the amount owed including wage garnishment and bank account levy.

During the downturn that began in 2008, thousands of Arizonans were financially trapped by deficiency judgments. REALTORS® saw firsthand the devastating impact on individuals and their families.

In 2014 REALTORS® supported passage and signing by the Governor of HB 2018. This new law prohibited deficiency judgements for some properties. In order to qualify for Arizona’s anti-deficiency protection, a property must be a single-family home or duplex on 2.5 acres or less, utilized as a dwelling and the borrower’s primary residence. Some other properties may qualify for anti-deficiency as well. Your client should consult an attorney for more information and to make sure they qualify for Arizona’s anti-deficiency protection.

Even in strong real estate markets, there are distressed homeowners and foreclosures. Using RAPAC funds, REALTORS® support candidates and elected officials who understand the importance of homeownership and allowing individuals to financially recover so they can once again contribute to the community and Arizona.

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