A deed of trust is the most commonly used form of security document by lenders when purchasing a home in Arizona. Most people would assume it’s the same as a mortgage. While they serve the same purpose, there are some key differences to understand. One of the differences is there are three parties involved in a deed of trust, which also makes the process after a default by the borrower different as well. Arizona law does require that a breach of contract lawsuit be pursued within six years of default, so a lender must in general act timely to pursue its rights under a deed of trust. M&G Law put this article together to help answer “What is a removal of deed of trust in Arizona?” and to help homeowners understand when they should review the option with an experienced real estate attorney.
Foreclosure Process on a Deed of Trust in Arizona
A deed of trust in Arizona has three parties involved, instead of just the borrower and the lender on a mortgage. The deed of trust contains a borrower, a lender and a trustee, which is generally an attorney or escrow company. In Arizona, this means that a default on a deed of trust can be handled with the judicial process or it can be cured with a trustee’s sale. The lender can issue a 90-day notice of the sale of the property and the borrower must pay back the entire amount owed, or the home will be put up for sale, without the need to go to court.
The lender must follow Arizona’s process to sell the home, but the process is much more straightforward than pursuing a foreclosure on a mortgage in court. In Arizona, the borrower does have the right of reinstatement before the sale of the home by bringing the loan payments current to avoid the forced sale of the property.
Arizona Statutes on Pursuing Borrowers for a Default
Many borrowers in Arizona have taken a second loan on a home with a deed of trust and this is where they want to be aware of Arizona’s statutes on the time limit for a lender to pursue debt owed. In general, lenders must pursue legal action for non-payment under a promissory note within 6 years from the date of default. This means that borrowers that have had a deed of trust lien on their property for more than 6 years from the date of default without resolution may have the ability to have the lien legally removed from the property.
Every situation is unique, and you will certainly want to review your potential claim or situation with an experienced Arizona real estate attorney. It does not mean that you should stop paying on a deed of trust loan and hope you can make it 6 years. That is unlikely to happen in most cases as the non-judicial foreclosure option is easier for first lien holders to pursue selling the home to cure the default.
The nature of second loans places the second lien holder in a potential position where they will be unlikely to get a full repayment from the sale of the home for many years. This leaves second lien holders in a position where they might wait for a sale of the home to get repayment. With the recent rise in home prices, second lien holders on a property might attempt to pursue legal action even after the 6-year limit has passed because there is finally enough equity in the home. This is why it’s especially important to understand your rights in Arizona if you have received notice from a second loan via a deed of trust.
Find an Experienced Arizona Real Estate Attorney
If you have found yourself behind on your loan payments for a home, you will want to review your options with an experienced Arizona real estate attorney. There are many ways to avoid foreclosure and work out a suitable plan for all lenders. You will also want to explore the removal of a deed of trust if the lender has emerged after many years without payment. Arizona law might allow the option to remove the lien entirely. If that’s not an option, our attorneys can represent your best interests in finding any possible solution to avoid a forced sale of the home. Contact us today at 602-533-2840 to schedule an initial consultation or make an appointment online.