Buying Arizona Real Estate » Anti-deficiency

The Upside of Short Sales

Tony Pomykala — Tue, 18 May 2010 20:01:22 +0000

note: I received this in an email, and thought it was worth sharing:

For the last few months we have been writing articles to keep Realtors informed on issues relating to short sales. We have had comments from some Realtors that they are afraid to handle short sales because of the risks involved. But lets look at the future of short sales and the potential benefits:

First, from the Realtor’s perspective, there isn’t much of an option. Since REOs and short sales account for 59% of homes sold in April, Realtors must be willing to take these listings. That percentage is expected to increase since there is a huge shadow inventory of homes that will be hitting the market in the next few months as lenders have stopped their moratorium on foreclosures after the beginning of the year. JPMorgan Chase Warns Investors about Strategic Defaults.
Short sales becoming more socially and ethically acceptable to homeowners because of government programs like HAMP and HAFA that have legitimized this option.
For homeowners that face a potential deficiency liability, a short sale gives another opportunity to get a release from that liability. If the lender will not allow the language necessary for this release, a short sale may still reduce the amount of that liability as opposed to a trustee sale.
If a homeowner knows there will be tax implications as a result of exiting a home, that liability may be reduced through a short sale as opposed to trustee sale that will typically fetch a lower price.
More and more homeowners are deciding to exit their property compared to a year ago when most were trying to keep their home through a loan modification. The reality that loan mods are a failed exercise and that lenders are not doing as promised has seemed to reach consumers. Here are 8 reasons that loan mods fail.

1. Lenders make promises and later deny or retract loan mod offers.
2. Temporary mods are often required but 3 to 5 months later they are told they do not qualify for a permanent mod.
3. Lenders continually request updated financial records. This is not just a nuisance but is a method used by lenders to extract further payments from the homeowner and try to determine available assets for lawsuits.
4. After following the lender’s instructions to make reduced payments as part of a temporary mod, when the lender later rejects that loan mod that borrower is now in default and the lender can file for trustee sale.
5. Most loan mods are only a forbearance under which the missed payments, penalties and interest are added as a balloon to the end of the loan, further increasing the homeowner’s negative equity.
6. Failure to disclose the investor and their NPV (Net Present Value) calculations to the homeowner make the decisions of the banks seem unreasonable and counter to financial logic.
7. “Permanent” mods are not typically permanent. In most cases the lower interest rates are only fixed for 3 to 5 years.
8. If a borrower decides to exit the property after receiving a permanent loan mod, it may be too late to receive the benefit of the Mortgage Debt Forgiveness Act (through 2012) creating a tax obligation that the borrower may not have faced, if they made their decision earlier.

Based on the results of loan mods to date, it seems a reasonable assumption that the whole process is not to help the homeowner, but to keep the homeowner making some kind of payment.

In the last HAMP report released in December of 2009, it is easy to see why homeowners need alternatives to loan modifications. In AZ only 4,137 homeowners have received a permanent modification. Nationally, out of 3.5 million homeowners that should have qualified, only about 66,000 received permanent mods and about half of those homeowners had their monthly payments increase.

Here are some tools that may be able to help homeowners decide whether or not a short sale is their best option.

Last chance to register for the free “Short Sales Exposed – Insiders Tell All Seminar“ on May 19th, 9:00AM to 12:00PM at the Scottsdale Center for the Performing Arts. Click here for more info or to register.

Doug Farnham (Central/Southern AZ)

(602)774-3753

dfarnham@tcmmg.com

Bob Verbic (Northern AZ)

(928)899-5765

bverbic@tcmmg.com

www.MortgageMediationGroup.com

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Special Anti-Deficiency Update for Arizona

Tony Pomykala — Tue, 24 Nov 2009 00:08:14 +0000

This just in from an email I received from the Arizona Association of REALTORS:

“The House of Representatives passed SB 1004, the anti-deficiency fix, early this afternoon with a vote of 53-0. SB 1004 included the repeal and replacement of ARS§ 33-814 essentially returning the statute to its original status prior to the passage of SB 1271. With this fix, Arizona will continue to operate as a deed of trust state with the protections that have been in existence since 1971.

SB 1004 did pass both the Arizona State Senate and House of Representatives with an emergency clause, and it will go into effect upon Governor Brewer’s signature. We will continue to work with the Arizona Bankers Association on language to address “speculative builders” in the upcoming session in order to resolve this issue entirely.”

Thanks to AAR for keeping us all up-to-date. Here is their website and contact info:

Visit RALLiNOW.com for all the latest legislative information.
Contact Legislative and Political AffairsArizona Association of REALTORS®
255 E. Osborn Rd., Ste. 200
Phoenix, Arizona 85012
www.aaronline.com

Telephone: (602) 248-7787
Fax: (602) 351-2471

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Arizona Anti-Deficiency bill, SB-1271

Tim L. Greenfield — Mon, 10 Aug 2009 20:22:08 +0000

Courtesy of Tim L. Greenfield, Associate Broker, ABR
Coldwell-Banker Residential Brokerage Scottsdale Arizona

8-10-09

Please visit my website www.GreatScottsdaleLiving.com for updates.

There has been lots of noise about SR-1271 of late. It is scheduled to become effective the end of September. This is a new law intended to assist small community banks that did not receive TARP funds. See Tom Farley’s (CEO of AAR) comments below

Anti-Deficiency Law Update:
“SB 1271 has been getting a lot of press lately as it will have serious and unintended consequences for many real estate owners facing foreclosure in Arizona. In light of this the original sponsor of the bill, Senator Steve Pierce, has asked the legislature and the Governor for an immediate repeal of the law which is slated to go into effect at the end of September. The state’s original anti-deficiency language has been inserted into two budget bills (HB 2008 and SB 1024) currently being debated by the legislature which would have the effect on nullifying the passage of SB 1271. HB 2008 has quickly passed the Arizona House of Representatives. SB 1024 is awaiting final vote which could happen August 8th or on the 10th. If for some reason, the Senate Bill fails on final vote, we will immediately focus on our next effort to repeal the law. The banking lobby and at least one member of the legislature are pushing for an amendment to SB 1271, instead of repeal, that would allow it to still apply retroactively to loans already in existence. We have been advised that this action would ultimately be unconstitutional. Stay tuned for more updates on our efforts to repeal SB 1271 through the bills cited above.

Backgrounder:

SB 1271 – Serious Changes to Arizona’s Anti-Deficiency Statute

SB 1271 was sponsored by Senator Sylvia Allen, a REALTOR® from the White Mountains area of our state. The legislation started out in January as a bill dealing with jail districts and property tax limits. In June a strike-everything amendment gutted the original bill and changed its direction entirely. The Arizona Bankers Association argued successfully that the changes provided in the legislation were necessary because abuses in the current law were costing Arizona-based banks millions in losses. There was significant sympathy for the Arizona community banks in making the changes provided by this legislation. In other words, the legislators found it very easy to hold property investors liable for their debts while arguing that homeowners would still retain their deficiency protection if they lived in the home for six consecutive months. The legislation sailed out of the Senate by a unanimous vote but just barely received enough votes to pass the Arizona House of Representatives. The Governor signed the bill on the last day to sign or veto the legislation.

The current law – Arizona Revised Statutes (A.R.S.) § 33-814 currently states that within 90 days after the date of sale of a trust property under a trust deed, a legal action may be brought to recover a deficiency judgment against the borrower (trustor) who has now had their property foreclosed. The deficiency judgment must be for an amount equal to the sum of the total amount owed as of the date of the sale either by the fair market value of the trust property as determined by the court or the sale price at the trustee’s sale, whichever is higher. The current law prohibits a lender from seeking a deficiency judgment against the trustor (foreclosed property owner) if the trust property is 2.5 acres or less and is used as a single one-family or single two-family dwelling.

Stay tuned to see how this plays out at www.GreatScottsdaleLiving.com.

TLG

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SB 1271 – Anti-Deficiency Legislation Update and More

GregsGold — Mon, 20 Jul 2009 04:25:35 +0000

Reprinted from an Email Blast sent to members of the Arizona Association of REALTORS®

from an Email Article By Tom Farley, CEO
Arizona Association of REALTORS® Read the FULL article at http://www.rallinow.com/issues/show/60

Request for the Governor’s Assistance

On Friday, the Arizona Association of REALTORS® (AAR) had a preliminary conversation with Governor Brewer’s staff regarding the impacts of SB 1271 and the need for an immediate fix to this legislation that becomes effective on September 30, 2009. AAR requested that the Governor amend her current Call for Special Session to include a fix to SB1271 with an emergency clause. Governor Brewer called the legislature into Special Session to deal only with the historic budget deficit. The Governor’s staff was receptive to our request and voiced a wiliness to work with AAR, but requested that we provide specific examples of legal issues resulting from SB 1271’s passage and how the bill would impact Arizonans if left unfixed. The Governor does not have to amend her Call for Special Session to include this issue, so the burden is on us to demonstrate the need for immediate action. If the Governor agrees with our request, our next job is to convince the legislature to fix the statute.

Early next week, AAR will deliver a letter outlining the issues as requested to the Governor’s office and formally make the request to amend the Call for Special Session to include this issue. Our goals are to narrow the bill’s impact, clarify the statute’s intent and to include an emergency clause in the legislation so that the AAR’s amendments would take effect and overwrite the amendments that SB 1271 made to the Anti-Deficiency statute before it goes into effect on September 30, 2009.

SB 1271 – Frequently Asked Questions (FAQ) Document in the Works

We have received numerous emails and phone calls asking several different questions regarding SB 1271’s interpretation. We are doing our best to provide those answers in an FAQ document. But because of several different views by attorneys across our state on how the changes to the statute should be interpreted, AAR is having difficulty providing those answers.

Keep up with the current issues and UPDATES posted on www.rallinow.com, AARNews, AAR’s FaceBook page and in our upcoming electronic association newsletter. Follow the Arizona Association of REALTORS on Twitter!

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