A Quick Guide to Arizona Mortgage Default Options in 2020

The global health crisis has left an astounding economic impact, and many homeowners are in financial distress. Millions were left unemployed, and though the job market is regaining lost ground, there are still those struggling to make their mortgage payments. The result is defaulted loans—1.6 million in April alone, a new record for the largest single-month jump. As foreclosures set new records in the wake of a pandemic, here is a helpful guide to your Arizona mortgage default options in 2020, so you can be in the know.

COVID-19 Impact on Arizona Mortgages

The Coronavirus Aid, Relief, and Economic Security Act, also known as the CARES Act, was passed in March and provided relief to struggling homeowners with federally backed mortgages. Those who qualified were also directed to local relief efforts.   

The Save Our Home AZ (SOHAZ) program aims help Arizona homeowners avoid foreclosure. The program utilized funding from the Department of Treasury to provide Principal Reduction Assistance, Monthly Mortgage Subsidy Assistance and Second Lien Elimination Assistance to homeowners who could prove a 10% or greater loss of income due to the pandemic. 

SOHAZ also works in conjunction with the Arizona eviction moratorium, which was extended to ban non-criminal evictions through October 31st. Note: On September 1, 2020, the U.S. Centers for Disease Control and Prevention (CDC) filed an order in the Federal Register to temporarily halt residential evictions to prevent the further spread of COVID-19 (hereinafter “Order”). The order provides that “a landlord, owners of a residential property, or other person with a legal right to pursue eviction or possession action” may not “evict” a covered person from any residential property from the date of the order through December 31, 2020 for matters related to non-payment of rent. For the purposes of the Order “other person” includes corporations, companies, associations, firms, partnerships, societies, and joint stock companies, as well as individuals.”

Property owners should seek relief from the Arizona Department of Housing if they were collecting rent payments from tenants.

What to Do if you Anticipate Missed Mortgage Payment(s)

The Arizona Department of Financial Institutions recommends first contacting your lender or servicer in the event that you anticipate a problem making future mortgage payments. You may be qualified to modify your loan. Homeowners can call the Arizona Mortgage Foreclosure Help Line (1-877-448-1211) for help working with the lender. The DFI also recommends staying away from anyone who promises mortgage help in exchange for the deed to your home. Additionally, all promises should be in writing. 

Mortgage Modification

Upon contacting your lender, you may be recommended a mortgage modification. This is a permanent restructuring of your loan to lower your monthly payment, either by extending the life of the loan or securing a lower interest rate. Borrowers must prove inability to make normal payments and then complete a trial period with the new payment amount. Mortgage modifications are typically for borrowers who are upside down on their loans, but the high rate of foreclosures during the pandemic may motivate your lender to make a deal with you. 

Deed-in-Lieu of Foreclosure

Homeowners in financial distress may also consider a deed-in-lieu of foreclosure. The deed to the property is given to the bank in lieu of holding a foreclosure sale, and it is less damaging to the borrower’s credit score. This allows the defaulted borrowers to save on the costs of the sale, and the process is expedited.  

Find an Experienced Arizona Real Estate Attorney

If you have received notice of a default on your mortgage or have a pending foreclosure, the property will be sold at auction if you do not take immediate steps to resolve the matter with your lender. Our firm can help you consider all your legal options and pursue assistance through the Save Our Home AZ (SOHAZ) program to avoid additional lawsuits or recovery efforts. There may even be options to renegotiate some terms of your loan so you can stay in your home or pursue adequate foreclosure defense. Contact us today at 602-562-7218 to schedule an initial consultation or make an appointment online.