Guarantors Can Waive Anti-Deficiency Protections

By:  Richard H. Herold and Ben Reeves

In Arizona, guarantors can now be held liable for deficiencies even where borrowers avoid liability due to Arizona’s anti-deficiency statute.

Arizona courts have been active in the last few years in addressing the law governing post-trustee’s sale deficiencies under Arizona’s anti-deficiency statute, A.R.S. §33-814(G), which provides that no deficiency action may be maintained “if trust property of two and one-half acres or less which is limited to and utilized for either a single one-family or single two-family dwelling is sold pursuant to [a] trustee’s…sale.” The deficiency is determined by crediting the borrower and guarantor with the higher of: (a) the fair market value of the property on the date of the trustee’s sale; or (b) the sale price at the trustee’s sale, to reduce the total balance due and owing.… Read More »

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Are Vacant Lots Protected Under Arizona’s Anti-deficiency Statutes?

By:  Ben Reeves

No, of course not.  Arizona’s anti-deficiency statutes only prohibit deficiency judgments after a trustee’s sale of a “dwelling”.[1]  Under no definition can a vacant lot constitute a “dwelling”.  This was the Arizona Supreme Court’s holding in BMO v. Wildwood Creek Ranch, LLC.

In BMO, Shawn and Kristina Rudgear (through their company Wildwood Creek Ranch, LLC) borrowed $260,000 to fund construction of a home on a vacant 2.26-acre lot.  This loan was secured by a deed of trust against the lot.

Construction of the home never began, the Rudgears defaulted, and BMO Harris Bank foreclosed via trustee’s sale. 

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Update – Prospective Waivers of “Fair Market Value” Hearings are Definitely Void.

fountain-390788_1280By:  Ben Reeves

In 2013, we blogged about the Arizona Court of Appeals’ determination that prospective contractual waivers of “fair market value” hearings are unenforceable as a matter of public policy.  The link to our prior blog post is here.  Although we noted some deficiencies in the Court of Appeals’ reasoning, we recognized that the holding reached a defensible legal result.  On review, the Arizona Supreme Court reached the same outcome…but with a more robust legal analysis.  See CSA 13-101 Loop, LLC v. Loop 101, LLC, et al., No. CV-14-0029 (Ariz. Dec. 31, 2014).[1]

The Arizona Supreme Court held that although Arizona’s anti-deficiency statutory scheme did not expressly prohibit contractual waivers of “fair market value” hearings, Arizona’s overall public policy behind the trustee’s sale process entitled borrowers and guarantors to the protection afforded by a “fair market value” hearing.… Read More »

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Amendments to Arizona’s Anti-deficiency Statute Exclude Homebuilders from Anti-Deficiency Protection

By:  Ben Reeves

Last Tuesday, April 20, 2014, Arizona’s Governor, Jan Brewer, signed HB 2018 into law.  This bill closes a long-standing loophole that allowed commercial homebuilders to take advantage of Arizona’s anti-deficiency statute, even though the statute was originally enacted to protect only homeowners.  In sum, for loans secured by residences that are originated after December 31, 2014, commercial homebuilders will no longer be able to avoid liability based on Arizona’s anti-deficiency statute, A.R.S. § 33-814(G).

A.R.S. § 33-814(G) provides that after a trustee’s sale, a lender cannot sue to recover the difference between the value of a “dwelling” and the amount owed on the loan (i.e., the “deficiency”). … Read More »

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A Person Owning a Fractional Interest in a Vacation Home is Protected by Arizona’s Anti-deficiency Statute

CabinBy:  Ben Reeves

In Independent Mortgage v. Alaburda, the Arizona Court of Appeals held that Arizona’s anti-deficiency statute, A.R.S. § 33-814(G), precluded a lender from suing its borrowers for a deficiency after foreclosing on the borrowers’ fractional interest in a vacation home.  230 Ariz. 181, 281 P.3d 1049 (Ct. App. 2012).

If a lender conducts a trustee’s sale of “trust property of two and one-half acres or less which is limited to and utilized for either a single one-family or a single two-family dwelling,” then A.R.S. § 33-814(G) bars a lender from suing a borrower to recover any difference between the value of the property and the amount of debt owed (i.e.Read More »

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