FORECLOSURE DEFENSE NEWS AND INFORMATION - Arizona

(a) Mortgages and Deeds of Trust: What is the Difference?

In Arizona, mortgages are less common than deeds of trust for a very simple reason: a deed of trust provides a better security interest for the lender. A mortgage is a two-party instrument that is basically a pledge of real property given by a borrower (a mortgager) to a lender (a mortgagee) to secure the payment of a debt. On the other hand, a deed of trust is a three-party instrument in which the borrower (trustor) conveys legal title to the property to the trustee. The trustee holds legal title to the property on behalf of the lender (beneficiary). The beneficiary's remedies under the deed of trust include those available to the mortgagee under a mortgage, as well as a non-judicial private power of sale (better known as a trustees sale) which are not available with mortgages. Except for certain "purchase money" residential loans, if a borrower defaults under either a mortgage or a deed of trust, the lender may foreclose upon the property or sue on the note.

(b) Foreclosure Options for Lenders.

(i) Judicial Foreclosure of a Mortgage:
When a borrower defaults under a mortgage, the mortgagee (lender) may seek to enforce either the security by judicial fore¬closure (in which case the security is sold by court order), or the mortgagee may elect to sue directly on the original indebtedness that is secured by the mortgage. In Arizona, a mortgagee cannot simultaneously maintain a judicial foreclosure and pursue a separate lawsuit on the debt. This rule is set forth in A.R.S. § 33-722, which provides, in relevant part, that the mortgagee may either sue directly on the debt (thereby waiving the mortgage) or judicially foreclose the mortgage.

(ii) Options for a Beneficiary Under a Deed of Trust:
A beneficiary under a deed of trust has two options to foreclose: the lender may: (a) foreclose on the property by a judicial sale just like a mortgagee; or (b) foreclose by a non-judicial trustees sale. The nonjudicial foreclosure sale is, by far, the (which is by far, the single most frequently utilized method of foreclo¬sure in Arizona. By using a nonjudicial foreclosure sale, the lender is able to simultaneously sell the collateral (the borrower's home) and sue directly on the note (which would be prohibited if the lender had pursued judicial foreclosure).

(c) Filing a Complaint to Stop a Foreclosure Sale.

Particularly in these difficult economic times, Courts have been willing to consider arguments made by homeowners to stop foreclosure sales and save their homes. One strategy for stopping a non-judicial trustee's sale is to determine whether the trustee provided formal notice to the homeowner, as required under Arizona Law. When a homeowner believes that legal notice was not provided by the trustee, the homeowner may file a complaint, requesting that the Court issue an order staying the sale, pending a resolution of the case. Homeowners can also challenge the amount of mortgage arrears claimed by lenders or loan servicing companies. These tools can be used to delay, and, in certain instances, stop a trustee's sale.

The applicable statutory language (from the Arizona Revised Statutes) that may be useful to a homeowner wishing to file a legal challenge in court to a trustee's sale is as follows:

33-808. Notice of trustee's sale

1. Recording a notice in the office of the recorder of each county where the trust property is situated.
2. Giving notice as provided in section 33-809 to the extent applicable.
3. Posting a copy of the notice of sale, at least twenty days before the date of sale in some conspicuous place on the trust property to be sold, if posting can be accomplished without a breach of the peace. If access to the trust property is denied because a common entrance to the property is restricted by a limited access gate or similar impediment, the property shall be posted by posting notice at that gate or impediment. Notice shall also be posted at one of the places provided for posting public notices at any building that serves as a location of the superior court in the county where the trust property is to be sold. Posting is deemed completed on the date the trust property is posted. The posting of notice at the superior court location is deemed a ministerial act.
4. Publication of the notice of sale in a newspaper of general circulation in each county in which the trust property to be sold is situated. The notice of sale shall be published at least once a week for four consecutive weeks. The last date of publication shall not be less than ten days prior to the date of sale. Publication is deemed completed on the date of the first of the four publications of the notice of sale pursuant to this paragraph

1. The date, time and place of the sale. The date, time and place shall be set pursuant to section 33-807, subsection D. The date shall be no sooner than the ninety-first day after the date that the notice of sale was recorded.
2. The street address, if any, or identifiable location as well as the legal description of the trust property.
3. The county assessor's tax parcel number for the trust property or the tax parcel number of a larger parcel of which the trust property is a part.
4. The original principal balance as shown on the deed of trust. If the amount is not shown on the deed of trust, it shall be listed as "unspecified".
5. The names and addresses, as of the date the notice of sale is recorded, of the beneficiary and the trustee, the name and address of the original trustor as stated in the deed of trust, the signature of the trustee and the basis for the trustee's qualification pursuant to section 33-803, subsection A, including an express statement of the paragraph under subsection A on which the qualification is based. The address of the beneficiary shall not be in care of the trustee.
6. The telephone number of the trustee.
7. The name of the state or federal licensing or regulatory body or controlling agency of the trustee as prescribed by section 33-803, subsection A.

The following legally described trust property will be sold, pursuant to the power of sale under that certain trust deed recorded in docket or book _______________________ at page __________ records of ______________ county, Arizona, at public auction to the highest bidder at (specific place of sale as permitted by law) _______________, in _______________ county, in or near _______________, Arizona, on ________, ____, at ___________ o'clock ___m. of said day:

It is no secret that Arizona has been devastated by the foreclosure crisis. Thousands of residents have lost their homes due to foreclosure, and many others are teetering on the brink of financial collapse. Luckily, there have been some signs of recovery. According to azcentral.com, between July 2011 and July 2012, there has been a 19% drop in homes being reposed or receiving foreclosure filings.

This news, however, is bittersweet. While the Arizona foreclosure crisis may be slowing down, Arizona still ranks #2 in the nation for overall foreclosures. According to RealtyTrac, a California-based company which tracks foreclosure statistics nationwide, 1 in every 346 Arizona homes is in some stage of the foreclosure process. And each month thousands of homes are entering foreclosure. The only state with more foreclosures per capitais California.