Arizona Foreclosure Laws

Learn about the foreclosure laws in Arizona. Research the foreclosure process in Arizona to understand how it works and the various stages of default. How long does foreclosure take in Arizona? What are the foreclosure consequences in Arizona? Is Arizona a judicial or non-judicial foreclosure law state? Find out the answers to these questions and many more with the foreclosure information and foreclosure laws in Arizona below.


Questions
How are trust deeds or mortgage liens treated in Arizona?
How are Arizona mortgages foreclosed?
What are the legal instruments that establish an Arizona mortgage?
How long does it take to foreclose a property in Arizona?
Is there a right of redemption in Arizona?
Are deficiency judgments permitted in Arizona?
What statutes govern Arizona foreclosures?

Answers

How are trust deeds or mortgage liens treated in Arizona?

Arizona primarily operates as atitle theory state where the property title remains in trust until payment in full occurs for the underlying loan. Foreclosure is anon-judicial remedy under this theory. The document that secures the title is usually called adeed of trust, but in Arizona, this is also referred to as atrust deed. Arizona law also permitsmortgages to serve as liens upon real property and forjudicial foreclosures to occur through the courts. Because thepower of sale provisions intrust deeds is a faster mechanism to effectuate foreclosure, this is the primary vehicle to foreclose.

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How are Arizona mortgages foreclosed?

The primary method of foreclosure in Arizona involves what is known asnon-judicial foreclosure. This type of foreclosure does not involve court action but requires notice commonly calledforeclosure by advertisement. When thetrust deed is initially signed it will usually contain a provision called apower of sale clause, which upon default allows atrustee to sell the property in order to satisfy the underlying defaulted loan. Thetrustee acts as a representative of the lender to effectuate the sale which typically occurs in the form of an auction. Because this is a non-judicial remedy there are very stringent notice requirements and the legal documents are required to contain thepower of sale language in order to use this type of foreclosure method.


Power of Sale Notice Requirements:

  1. Prior to initiating a foreclosure the lender must publish a notice of sale date at least once a week for 4 consecutive weeks in a newspaper of general circulation in the county in which the property is located. Within 20 days of the proposed sale a notice must be posted at the property to be foreclosed. A notice of the proposed sale must also be recorded with the recorder where thetrust property is located.
  2. Notice of foreclosure sale as described above must contain certain information, including the date, time and place of sale, the street address and legal description of the trust property, the county tax assessors parcel number, the original principal balance as referenced on the trust deed, the name of the beneficiary (lender) and trustee – to include the trustees qualifications and telephone number.
  3. Foreclosure sales must take place between 9AM and 5PM on a day other than a Saturday or legal holiday at the time, place and date designated in thenotice of sale as part of a public auction. The trustee will auction the property to the highest bidder, including the lender, which is the only party who can make a credit bid. The foreclosure sale may be postponed by the party conducting the sale be providing a declaration of the changed date, time and location, which shall be within 90 days of the original sale. A sale that occurs during a pendingundisclosed bankruptcy (which would have been a violation of theautomatic stay) will typically be postponed 28 days. A sale cannot occur sooner than 90 days from the date of the filing of theNotice of foreclosure sale and not less than 10 days from the date of last publication. Atrustee's deed is issued after the foreclosure sale is completed.

In Arizona, the lenders can also go to court in what is known as ajudicial foreclosure proceeding where the court must issue a final judgment of foreclosure. If thedeed of trust does not contain thepower of sale language, the lender must seek judicial foreclosure. The property is then sold as part of a publicly noticed sale. A complaint is filed in court along with what is known alis pendens. Alis pendens is a recorded document that provides public notice that the property is being foreclosed upon.

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What are the legal instruments that establish an Arizona mortgage?

The documents are known as thetrust deed ordeed of trust, and in a commercial transaction, asecurity agreement. Sometimes the mortgage document is combined with thesecurity agreement. Alternatively, amortgage is filed to evidence the underlying debt and terms of repayment, which is set forth in thenote.

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How long does it take to foreclose a property in Arizona?

Depending on the timing of the various required notices, it usually takes approximately 120 days to effectuate an uncontestednon-judicial foreclosure. This process may be delayed if the borrower contests the action in court, seeks delays and postponements of sales, or files forbankruptcy.

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Is there a right of redemption in Arizona?

Arizona has no post-salestatutory right of redemption, which would allow a party whose property has been foreclosed to reclaim that property by making payment in full of the sum of the unpaid loan plus costs.

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Are deficiency judgments permitted in Arizona?

Yes, adeficiency judgment may be obtained when a property in foreclosure is sold at a public sale for less than the loan amount that the underlying mortgage secures. Lenders are prohibited by statute (33-729) from obtaining deficiency judgments in foreclosures where the land size is 2.5 acres or less and where the property was used as either a single one-family or single two-family dwelling. Deficiency actions must be brought within 90 days of a power of sale foreclosure. Any judgment is limited to the difference of the balanced owed and the fair market value of the property.

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What statutes govern Arizona foreclosures?

The laws that govern Arizona foreclosures are found in Article 33, Chapters 6, 6.1 of Arizona Revised Statutes. To view these statutes on the Web, you can visit:

http://www.azleg.state.az.us/ArizonaRevisedStatutes.asp?Title=33


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