Over the past decade, there have been significant changes to the foreclosure process to offer additional protections to borrowers. It is important for lenders and borrowers to understand the requirements that must be met before any foreclosure can commence. Once those required steps have been taken, lenders in Arizona can pursue a judicial foreclosure or a non-judicial foreclosure.
We’ve put together this summary so anyone involved in a potential foreclosure can understand the difference between non-judicial foreclosure and judicial foreclosure in Arizona.
Process Required Before Foreclosure in Arizona
Lenders in Arizona will generally have to provide borrowers with the appropriate notices and loss mitigation opportunities before they can proceed with a foreclosure. To begin, lenders need to provide written notice of the breach and include the available options for them to get back into good standing.
What to Expect in Preforeclosure?
Once a borrower falls behind on their required loan payments, they are typically in a stage called preforeclosure.
- Lenders must provide the appropriate written notices of the breach and inform the borrower what options they have to avoid foreclosure.
- Lenders are able to charge certain fees for being late on payment or any required inspections of the property.
- Most loan agreements do include a grace period for borrowers to make full payment before they will be charged any penalties or late fees.
In Arizona, lenders that utilize a deed of trust generally have the right to perform inspections on the property to protect their interest in the property. When borrowers are late on their loan payments past the grace period, they can expect to have an inspection performed on the property and the borrower will have the cost of those inspections added to their past due amount.
Understanding Federal Mortgage Servicing Laws
Current Federal mortgage servicing laws require lenders to contact or attempt to contact any delinquent borrower by phone to discuss the options for loss mitigation within 36 days of a late payment.
- They must present options for the borrower to modify the loan or create a new repayment plan.
- Lenders must provide delinquent borrowers with all available loss mitigation options in writing within 45 days from missing a payment.
- Lenders are also required to appoint someone from their company to assist the borrower with pursuing the best option for them to avoid foreclosure.
The foreclosure process cannot typically start until the borrower is at least 120 days late on required payments. This time period is allotted to provide motivated borrowers with plenty of time to work out a loss mitigation option that allows them to avoid foreclosure.
Differences Between Judicial Foreclosure & Non-Judicial Foreclosure
Judicial foreclosures start with the lender filing a lawsuit against the borrower asking the court to allow a foreclosure sale.
- Borrowers must provide a written response to the court or the lender will win the case by default.
- If the borrower decides to defend against the claim in court, they must present their evidence to the court why the foreclosure is not justified.
- Most common defenses include the failure of the lender to provide appropriate notices of breach and loss mitigation. The property will be sold at auction if the lender wins the lawsuit.
Non-judicial foreclosures in Arizona follow a strict process detailed in Arizona Revised Statutes 33-808.
- The trustee or lender must record a notice of sale in the land records scheduled for at least 91 days after the notice is recorded.
- The trustee must send the borrower a notice of the sale via certified mail within 5 days of the recording as well.
- The trustee must publish the notice of the sale in a public newspaper for four consecutive weeks and post notice on the property at least 20 days before the sale.
In both judicial and non-judicial foreclosure, the sale of the home after foreclosure must follow the state rules for a public auction.
Find an Experienced Real Estate Attorney in Arizona
Most trustees and lenders simply wish to have the planned payments made on their loan and most borrowers want to get their home paid off as scheduled. However, many reasonable things can cause a borrower to fall behind on mortgage payments.
Arizona laws are designed to give borrowers reasonable opportunities to get their payments back on track and avoid losing their home or property. Federal and state laws require trustees and lenders to follow a certain process that gives borrowers ample opportunity to work with the lender on a solution to their breach.
The experienced real estate attorneys at M&G routinely represent trustees, lenders and borrowers dealing with judicial and non-judicial foreclosures. Contact us today at 602-562-7218 to schedule an initial consultation or make an appointment online here.