If you’re behind in your mortgage payments and facing foreclosure in Arizona, you should learn as much as you can about the state’s foreclosure laws. In this article, you can find out about:
You’ll also get information about significant protections for homeowners under federal law, like the 120-day preforeclosure period.
Under federal law, in most cases, a loan servicer must wait until the borrower is over 120 days' delinquent before officially starting the foreclosure process. (12 C.F.R. § 1024.41). The 120-day preforeclosure period is an appropriate time to submit an application to your servicer asking for a loss mitigation option (an alternative to foreclosure). You might be able to stay in your home by working out a repayment plan or modification, for example, or give it up without going through a foreclosure in a short sale or deed in lieu of foreclosure.
Federal law also provides other protections to homeowners facing a foreclosure, like by forbidding dual tracking.
Because most foreclosures in Arizona are nonjudicial, this article focuses on that process.
Arizona law doesn’t require the foreclosing bank to notify the borrower before officially starting the foreclosure. But most deeds of trust require the bank to send a breach letter before accelerating the loan and proceeding with foreclosure. This letter notifies borrowers about the default and that a foreclosure will start if they don’t cure that default.
Also, before a foreclosure starts, federal law requires the servicer to send letters informing the homeowner about foreclosure avoidance options.
In Arizona, the trustee—the third-party that administers nonjudicial foreclosures—starts the foreclosure process by the recording of a notice of sale in the county recorder’s office. The notice must include the date, time, and place of the sale. The sale date can’t be sooner than the 91st day after the notice of sale's recording date. (Ariz. Rev. Stat. § 33-808(C)(1)).
The trustee must then mail a copy of the notice of sale by registered or certified mail to the borrower within five business days after the recording date. (Ariz. Rev. Stat. § 33-809(C)).
The notice of sale must also be:
"Reinstating" is when a borrower brings the loan current by paying the missed payments of principal and interest, plus fees and costs, to stop a foreclosure. In Arizona, you can reinstate anytime before 5:00 p.m. mountain standard time on the last day, other than a Saturday or legal holiday, before the sale date. (Ariz. Rev. Stat. § 33-813).
In some states, a foreclosed borrower may redeem the home within a specific amount of time after the foreclosure sale. Arizona law, however, doesn't permit foreclosed homeowners to redeem the home following a nonjudicial foreclosure. (Ariz. Rev. Stat. Ann. § 33-811(E)).
When the total mortgage debt exceeds the foreclosure sale price, the difference is called a "deficiency." Some states allow the foreclosing bank to seek a personal judgment, which is called a "deficiency judgment," against the borrower for this amount. Other states prohibit deficiency judgments with what are called anti-deficiency laws.
Deficiency judgments are generally allowed. In Arizona, the foreclosing bank can generally obtain a deficiency judgment by filing a separate lawsuit within 90 days following a nonjudicial foreclosure sale.
Anti-deficiency law. But Arizona also has an anti-deficiency law that states the bank can't get a deficiency judgment after a nonjudicial foreclosure if the property is:
This article contains citations to Arizona’s foreclosure laws so you can read the statutes yourself. Keep in mind that statutes change, so checking them is always a good idea. (If you need help finding the statutes, see Finding Your State’s Foreclosure Laws.) How courts and agencies interpret and apply the law can also change. And some rules can even vary within a state. These are just some of the reasons to consider consulting a lawyer if you’re facing a foreclosure.
You should also consider talking to a lawyer if you want to get more information about foreclosure procedures in Arizona or find out about potential defenses to a foreclosure. Moreover, it's a good idea to make an appointment to speak to a HUD-approved housing counselor to learn about different loss mitigation options.