We know how complicated foreclosures can be. There’s a great deal of stress and uncertainty that comes with it. This is why homeowners should understand how mortgages work in the first place. Just like in other states, Arizona has its specific  regulations in the realm of real estate and homeownership. Therefore, it only makes sense for a homeowner to have a thorough understanding of mortgages in Arizona.

Mortgages and Homeownership in Arizona

Before delving into the foreclosure process, it’s essential to grasp the fundamental concept of mortgages and homeownership in Arizona.

• Mortgages in Arizona

A mortgage is a legal agreement between a borrower and a lender, where the borrower receives funds to purchase a home and promises to repay the debt with interest over a specified period. In Arizona, mortgages are typically used to finance the purchase of real property. The mortgage contract serves as security for the lender.  It ensures that they can recover their investment in the event of default.

• Deeds of Trust

In Arizona, most home loans are secured by deeds of trust rather than traditional mortgages. A deed of trust is a legal document that involves three parties:  the borrower (trustor), the lender (beneficiary), and a neutral third party called the trustee. The trustee holds legal title to the property on behalf of the lender until the loan is paid off.

The Foreclosure Process in Arizona

Foreclosure is the legal process through which a lender can take ownership of a property when a borrower defaults on their mortgage payments. Arizona has a non-judicial foreclosure process. This means that the foreclosure can proceed without court involvement. Here are the major players in the foreclosure process in Arizona:

• Trustee

In a deed of trust, the trustee plays a pivotal role in the foreclosure process. They are responsible for initiating and conducting the foreclosure sale when the borrower defaults on the loan. The trustee must follow strict legal procedures and timelines outlined in Arizona Revised Statutes Title 33, Chapter 6, which governs trust deeds.

• Borrower

The borrower is also known as the trustor in a deed of trust. This is the homeowner who took out the loan to purchase the property. When the borrower defaults on their mortgage payments, the lender can initiate foreclosure proceedings.

• Lender

The lender is referred to as the beneficiary in a deed of trust. This is the entity or individual who provided the loan to the borrower. In a foreclosure, the lender is the party seeking to recover the outstanding debt by selling the property through the trustee.

• Public Trustee

In some Arizona counties, a public trustee may be involved in the foreclosure process. The public trustee’s role is to ensure the foreclosure process follows the law. Also, this party conducts the foreclosure sale. However, not all Arizona counties have a public trustee.

The Foreclosure Timeline in Arizona

The foreclosure process in Arizona follows a specific timeline governed by state laws. It’s crucial to understand these timelines. They dictate the rights and responsibilities of both borrowers and lenders during the foreclosure process. Here is an overview of the key steps:

• Notice of Default: When a borrower defaults on their mortgage payments, the lender typically initiates the foreclosure process. It begins with recording a Notice of Default (NOD) at the county recorder’s office. This document officially starts the foreclosure timeline.
• Notice of Trustee Sale: After the NOD has been recorded, the trustee must send a Notice of Trustee Sale (NOTS) to the borrower. It is also published in a local newspaper. The NOTS sets a date for the foreclosure auction. This is typically at least 90 days after the NOD is recorded.
• Foreclosure Sale: On the scheduled auction date, the trustee conducts the foreclosure sale. The property is sold to the highest bidder, which is often the lender. Afterward, the winning bidder receives a trustee’s deed upon sale.
• Redemption Period: Arizona law provides a redemption period for borrowers, during which they can reclaim the property by paying the full debt, including interest and costs. The length of the redemption period varies based on the type of foreclosure.
• Eviction: If the borrower does not redeem the property during the redemption period, the winning bidder can seek an eviction order to take possession of the property.

Deficiency Judgments

One important aspect of foreclosure in Arizona is the potential for deficiency judgments. A deficiency judgment allows the lender to seek the remaining balance of the loan from the borrower if the foreclosure sale does not cover the full debt. However, there are certain restrictions on when and how lenders can pursue deficiency judgments in Arizona.

The Importance of Understanding Mortgages in Arizona

For both borrowers and lenders, an understanding of mortgages and the foreclosure procedure is essential. Foreclosure can be an upsetting process with the legal complications frequently involved. Thus, it’s always advisable to seek legal counsel or professional advice when facing foreclosure or dealing with mortgage-related issues.