Arizona’s homeowner’s mortgage protection law has long been a hallmark of Arizona public policy and protects homeowners from financial ruin when purchasing a home. This law has been in place for several decades (Ariz. Rev. Stat. Ann § 33-814(G) and precludes a lender from obtaining a deficiency judgment against residential properties that are underwater, i.e. the mortgage is greater than the value of the home. This policy has been confirmed by numerous court cases.  The typical foreclosure example of foreclosure is as follows:

  1. A homeowner purchased a residential property of 2.5 acres or less for $200,000.00 with $25,000 down and took out a $175,000 purchase money mortgage.
  2. Because of a change in the homeowner’s financial circumstances, the homeowner defaulted on the loan and the home was lost as a result of the lender’s foreclosure at a Trustee sale.
  3. The high bid at the Trustee

Under this example, can the lender still collect the full $175,000.00, costs and attorney’s fees and charge the homeowner for a $25,000.00 plus deficiency obligation? NO

Arizona courts have repeatedly answered this question in the negative. The lender can only take back the home, no more, and must end its collection efforts against the homeowner.

Lat J. Celmins


Foreclosure For Sale Real Estate Sign Isolated on White.