If you are experiencing foreclosure, contact Chase Law Firm at (480) 499-5334 for a case-specific consultation. In this article we offer only general information about foreclosure in Arizona. Your rights and remedies will depend on the facts of your case.
There are two types of (involuntary) foreclosure in Arizona, judicial and non-judicial. A foreclosure is the process by which a lender or secured party obtains possession of property that was promised to secure a loan in order to sell it and pay some of the debt.
The judicial foreclosure process is through the courts. It is a lawsuit brought by the lender against the homeowner. The process begins with the homeowner being served a Complaint and a Summons to appear in court. The “judicial” part, therefore, refers to the fact that foreclosure is being done through a court proceeding. In Arizona, judicial foreclosure is more likely to be used in commercial mortgages and purchase agreements than residential homes.
The non-judicial process, also known as foreclosure by trustee’s sale, does not require the filing of a lawsuit. The process actually begins with a “Notice of Trustee’s Sale” (the “Notice”) being sent to the homeowner. See A.R.S. 33-808. The lender or trustee is required to record, post, and publish the Notice, and to mail a copy to the homeowner after it has been recorded. The recording takes place at the county recorder’s office. The Notice is supposed to be posted in a conspicuous place on the trust property, i.e. the residence, as well. Generally, it’s posted to the front door or gate of the property.
The Notice should describe the property to be sold and state the time, date, and place of the trustee’s sale. The homeowner has 90 days after the date of recording before a trustee’s sale.* A sale can occur on the 91st day after the Notice is recorded. During this time it is important to contact an attorney to discuss your options.
The trustee may voluntarily continue the sale to another date. If so, they are not required to provide a second notice of the new date. If a trustee’s sale is cancelled, a Notice of Cancellation must be recorded.
Many people mistakenly believe that applying for a loan modification or short sale will automatically stop a trustee’s sale. However there can be delays in communication or simply a lack of communication that causes the trustee’s sale to continue. It is imperative to call the lender and the trustee for confirmation that a sale date has been cancelled or postponed. The burden shifts to the homeowner to unwind a trustee’s sale which is very difficult and expensive to do after the sale has already happened.
Power of Sale
You may be asking, “how does the lender get the power to sell my house without filing a lawsuit?” Well…
When someone buys a house or gets a home equity line of credit (HELOC) on their house, they might sign a ”Deed of Trust” after they have already bought the home. The Deed of Trust grants the house to the lender to hold “in trust” until the loan is paid. The house doesn’t go anywhere, but the lender has a right to exercise certain powers under the Deed of Trust if the homeowner fails to pay their mortgage.
In particular, the Deed of Trust contains language granting the lender or their trustee the “power of sale” as a remedy in case of default. This allows the lender to sell the home at a public auction if the homeowner does not keep up with the mortgage. The lender may appoint a separate entity to act as trustee, which is often the case.
The lender, servicer, and trustee may be three completely separate companies in different states. It is important to understand who your lender, servicer, and trustee are and keep up to date contact information for each.
The lender is ultimately the primary creditor for your mortgage while the servicer and trustee are agents of the lender. But any or all of them can change at any given time. Generally there are notices required if this happens but homeowners can sometimes ignore this information.
The “power of sale” contained in the Deed of Trust allows the lender to appoint a trustee with the authority to foreclose on the property without filing any messy court paperwork. The trustee simply follows the Notice procedures before holding a public sale. At the trustee’s sale, the lender may convey the property to a third party or make a “credit bid” to take possession if there are no buyers.
Trustee’s Deed Upon Sale
After the sale, the trustee issues a “Trustee’s Deed upon Sale” to the new third party buyer. The Trustee’s Deed Upon Sale constitutes a final sale or conveyance of the property to the buyer. The sale is presumptively valid once the buyer tenders payment and receives the trustee’s deed. Recording is not a necessary step to complete the sale.
Since the resident or former homeowner is no longer the owner after a trustee’s sale, they must vacate the property. The new owner will give notice of their ownership and demand possession if the property is occupied. The new owner is entitled to immediate possession and may file eviction proceedings against anyone still living there after the trustee’s sale occurs.
Right of Redemption
Before a foreclosure is final, the homeowner has a right of redemption. The right of redemption is available until 5pm the day before a trustee’s sale. To redeem, the homeowner must deliver payment to the trustee to bring their mortgage account current. This may require the homeowner to pay all of the interest, charges, penalties, and fees that have accrued since their first missed payment, in addition to their monthly mortgage arrears.
If the homeowner cannot become current or if the right to foreclose is disputed, the homeowner may need to file an emergency lawsuit or seek relief in bankruptcy. Neither of these options guarantee the homeowner will retain possession of the property, but they may give the homeowner more time to become current on their mortgage through a Chapter 13 bankruptcy plan or to negotiate options such as loan modification with their lender.
There are many options for homeowners facing foreclosure, even if you cannot afford to keep your home. If you are facing foreclosure, contact Chase Law Firm now at 480-499-5334.
Note: This article does not address the Protecting Tenants at Foreclosure Act of 2009 which may effect the rights of non-owner tenants or the Homeowner Bill of Rights under the National Mortgage Settlement, see http://www.nationalmortgagesettlement.com/.